Effect of Rising Tuition on Low to Middle Income Families

Shranna Jaggernath

If you want a good middle class job, you need to go to university.  That’s what we’ve been told, and we listened.  This past August, the Council of Ontario Universities announced that a record number of 90,000 students had enrolled in Ontario universities for the fall, 2000 more than 2003 when OAC was eliminated and grade 12 and OAC students graduated at the same time.

However, with Ontario’s university students facing the highest tuition fees in the country, lower to middle income families are struggling with the ability to help their child go to university and graduate without debt.

The Canadian Centre for Policy Alternatives’ (CCPA) report Under Pressure: The impact of rising tuition fees on Ontario families (August 2011) discusses how stagnant incomes, increasing household debt, and rising tuition fees are forcing low to middle income families to play a kind of priority roulette when it comes to sending their children to university.  These families have to make difficult decisions and prioritize between meeting basic daily expenses, mortgage payments, saving for retirement, getting out of debt, or sending kids to university.

Consider the financial reality faced by low to middle income families:

  • In 1990, the family debt load was equal to 93% of disposable income; due to rising mortgage debt and a reliance on credit, families now have a debt load equal to 150% of their disposable income;
  • Income of the lowest three quintiles of income distribution have seen little to no wage increase above inflation;
  • A middle class family has experienced only a 10% increase in after-tax income (an average of $48,000 in 1990 to $54,000 in 2011);
  • Low-income families make less today than they did in 1990 (an average of $16,000 to $15,000 adjusted for inflation);
  • In 1990, the average university student paid $2,500 (in 2011 dollars) for a year.  This fall, it has been estimated that the average student will pay $6500 a year.  After adjusting for inflation, that is a 244% real tuition fee increase between 1990 and 2011.

The CCPA report estimates that if a family dedicated every cent of their after-tax earnings toward their child’s university fees starting on September 1, 2011(which means they would have to defer all financial commitments i.e. bills and stop eating entirely starting September 1), they would have to work until March 14, 2012 (195 days) to pay for a four-year degree.  Low income families would have to avoid paying all of their bills and stop eating until July 5, 2013 (673 days or almost 2 years).

We can’t just stop paying the bills or stop eating, so what does this mean for lower to middle income families who want to help their children attend university but are already financially over-stretched?  It could mean taking on a second job or picking up extra shifts.  It could mean downsizing to a smaller house, taking out an extra mortgage, getting a line of credit or maxing out credit cards.  Another option is postponing retirement or reducing savings.  Or, like me, the students themselves may be forced to take out loans and accumulate mortgage-like student debt.  Of course, these burdens are multiplied if there are multiple children to consider or the student is smart enough to get into professional programs.

Unfortunately, for some families, the burdens and sacrifices required to send a child to university may be enough to making higher education out of reach.  According to the Canadian Federation of Students, debt and fear of debt have been shown to be deterrents for lower to middle income families to attend university.  Moreover, research from the University of British Columbia has shown that higher debt loads correlate with the non-completion of degrees.

Ontario will pay a steep price if the provincial government continues to download the cost of higher education to families and students.  Families who assume higher debt loads to fund their child’s university education will compromise their own financial situation.  Highly educated students with crushing debt are unable to effectively contribute to society, start families, or become homeowners since their priority is repaying their loans.  Some students have reported scaling back their dreams and abilities in order to not take on large amounts of student debt.  Professional students, such as medical and law students, may opt for lucrative careers, rather than going into family practice or pro bono work, because these jobs pay the kind of money that will help them drastically reduce their debt.

There are tremendous benefits to having a knowledge-based society, but the rising cost of university education and the already unstable financial situation of many lower to middle income families make university an expensive risk.  Affordable and accessible university education makes financial sense and is invaluable for Canada’s long-term economic success.

The report can be downloaded for free at http://www.policyalternatives.ca/publications/reports/under-pressure.

Shranna Jaggernath is in the first year of her Master in Public Policy at the University of Toronto’s School of Public Policy and Governance.

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