The High Price of Higher Education

Cayla Baarda

Governments around the world are increasingly recognizing the payoffs of an educated population, not least of which include greater labour productivity and higher earning potential. Still, not all politicians can agree on precisely how much public money should be spent on assisting individuals’ pursuit of higher education. In 2014, Germany made headlines when the last remaining state in the country abolished tuition fees. Earlier this month in Nova Scotia, the Cape Breton University student union, faculty association, and administration came together to create a document asking the federal government to remove tuition fees and ease the financial burden on students.

In Canada, user fees suggest that higher education is more of a private — rather than a public — good. Tuition structures necessitate that students bear some of the responsibility for both the costs and risks associated with pursuing a post-secondary education. Education is therefore viewed as an up-front investment, with a number of future benefits available to the individual student.

The most visible manifestation of this upfront investment comes in the form of tuition fees, estimated to be on average $5,959 per year for full-time domestic undergraduate students in Canada. Across the provinces, postsecondary education is currently most expensive in Ontario, with average tuition fees of $7,359 per year (whereas undergraduates in Newfoundland and Labrador pay the least at $2,631 per year).

While students within Ontario do have a number of grants or other financial supports available to them, about 6 in 10 graduating undergraduate students report having some debt from financing their education. Among those students, the average debt per student amounts to about $14,453.

Rising tuition fees and student debt can create barriers to securing higher education for many interested and qualified individuals. Data from Statistics Canada’s Youth In Transition Survey (2011) showed that 61 per cent of youth from high-income backgrounds had attended university (or at least have taken a course) by age 21, compared to only 41 per cent of their peers from low-income backgrounds. The Higher Education Quality Council of Ontario has supported these findings, stating that those from low-income backgrounds are more reluctant to take out loans to finance their education, discouraging them from enrolment.

Ontario’s 30-per-cent off tuition grant was introduced in 2012 as a way to help students with the rising costs of education. The grant offers up to $1,780 per year for university students, and $820 for college students. Yet in reality, only around 40 per cent of students qualify for the grant, since it excludes part-time, graduate, professional, and adult students, as well as those whose family income exceeds $160,000. Moreover, not everyone who qualifies for the grant applies for it, and $50 million of the money allocated for the 2014-2015 academic year has not even been collected.

So what is the alternative to high – and rising – tuition? Advocates for fully funded state education (when government subsidizes education at nearly 100 per cent), such as Denmark and Finland, approach post-secondary education as a public good. Removing cost barriers has an objective of attracting all students with the desire and necessary talent to attend. In Denmark, students attending post-secondary also qualify for a generous study grant, which helps to cover the costs of living while pursuing studies.

In reality, however, this type of system is unlikely to ever emerge in Canada, which does not have the typically high levels of taxation required to support generous levels of state intervention in education. Adopting a more progressive tax system, whereby high-income families pay even more tax, would almost certainly be considered political lunacy for any party. Changing the way that universities are funded in any province, including Ontario, would also be a very difficult task. The Canada Social Transfer is the primary federal contribution to the provinces’ social programs, including post-secondary education. The federal government provides block funding on a per capita basis (collected from taxes), and the province can allocate this funding to whichever social programs they choose. In short, the province has little say in the total amount of funding received.

The Ontario government has recently switched their funding focus from equity and accessibility of education to labour market success. A new funding formula, which determines how much money each university in the province receives, focuses on outcomes such as employment rates rather than strictly enrolment numbers. While the intention is to promote quality throughout the education system, it will undoubtedly have an impact on the amount of funding per student – and therefore, on tuition fees. Although undergraduate tuition is currently capped at 3 per cent increases per year, this cap is set to expire in 2017.

While “free” tuition may be something better left to the Europeans, there are a number of policy options that could mitigate the rising costs of tuition for Ontario students:

  1. Renew the tuition cap of a 3 per cent increase per year past 2017, or to lower it further. The move would not be politically unprecedented, as the cap used to stand at 5 per cent per year (until 2013 when, the then-Liberal government lowered it). Alternatively, the cap could be legislated so that it cannot rise at a rate higher than inflation, a policy that has been in place in Alberta since 2006.
  2. Decrease tuition fees. The Canadian Federation of Students has long been advocating for tuition decreases, rather than caps on increases. The organization has put forth the argument that the province should put the $430 million dedicated to the 30 per cent off tuition grant towards reducing tuition across the board, ensuring that this money has the greatest impact possible. It estimates that re-directing this money could result in 13 per cent reduction in tuition for all students across Ontario, including those in professional or graduate programs (who currently cannot access the grant).
  3. Freeze tuition fees for a set time period. The New Democratic Party promised to freeze tuition fees in its most recent provincial election platform, following suit with Newfoundland and Labrador, which has been freezing tuition fees for over a decade. However, the NDP estimated this cap would cost the province $90 million in 2015-16, $175 million in 2016-17, and $270 million in 2017-18 — and given the increasing provincial deficit, it may not be the most popular option politically.

Regardless of the strategy, the Ontario government must realize that tuition fees are hurting students, in particular low-income students, and negatively impacting both labour productivity and earning potential. If the decision to attend university or college continues to become more expensive, there is a growing risk that students may decide that in fact the future benefits of post-secondary education do not outweigh the costs. And as labour force growth slows in the coming decades, and the demand for skilled workers increases, this is a reality that Ontario really cannot afford.

Cayla Baarda is a 2016 Master of Public Policy candidate at the School of Public Policy and Governance, University of Toronto. She holds a Bachelors degree in International Development from Guelph University with a specialization in Political Economy and Administrative Change. Cayla recently worked as a researcher with a social start-up in Copenhagen, Denmark. Her main areas of policy interest include education policy and foreign policy.

[Image: Wikimedia]