Higher Education Strategy Associates

Author Archives: Joseph Berger

May 17

The New York Times Swings and Misses

Sure signs of spring: baseball is back (and so is Vlad!), Ottawa is full of tulips, Quebec students are demonstrating in the buff and newspaper editors are turning their attention to student debt.

Exhibit A: the Globe’s spread on debt last Saturday (full disclosure: HESA supplied some of the data the Globe published).

Exhibit B: the cover of Sunday’s New York Times – “A Generation Hobbled by the Soaring Cost of College.”

Now, geeky wonks that we are, our first reaction to the appearance of higher education policy issues front and centre in the press gets us excited all out of proportion. And, nine times out of ten, our excitement turns to righteous indignation as soon as we read what’s written. For some inexplicable reason, journalists don’t tend to report stories the way we would want. So we eat breakfast. Outrage fades. We go on with our weekend.

But, as my insightful colleague Don Heller points out, there’s some crucial sleight of hand going on in that Times piece (and a major factual error) that, given the Times’s outsized influence, could seriously degrade the quality of public debate around higher education affordability. The Times chose to illustrate its story – which reported the average U.S. Bachelor’s-degree-holder debt (excluding those who have no debt) at $23,300 in 2011 – with the story of a hard-luck graduate of a private university marketing program with no prospects and $120,000 in debt.

Don points out the sequence of lousy decisions that have culminated in this student’s moving back in with her parents, and pinpoints how anomalous her story is. Moreover, it’s become clear that the Times misread survey data to conclude that 94% of graduates accumulate debt, when the actual figure is 62%. (The Times’s corrected the error on Wednesday.)

To its credit, the Globe chose to illustrate its piece about average student debt with a story about a graduate with… average student debt.

As we pointed out a few weeks ago, deriving meaning from the stats on student debt isn’t as obvious as it may seem. Newspaper stories that namecheck means and medians but focus on the 1% of graduates in dire straits ($120,000 in debt! “But when I graduate, I’m going to owe like $900 a month. No one told me that”!) royally undermine efforts to have a reasonable debate about access to education and student debt. By presenting the extreme as the norm, newspapers may get more hits, but they betray their public service mission.

We can surely expect better from the New York Times.

May 11

Hooked on School

What do Canadian students do when they’ve finished their university studies? And how do they differ from students in other parts of the world? We recently had the opportunity to examine country-level graduate surveys around the world.

Now, there are important caveats – no two countries conduct the same survey among the same exact population of graduates at the exact same time (and international data agencies like the OECD restrict most of their graduate analysis to fairly basic indicators, such as employment rates and earnings). Fortunately, centrally-coordinated surveys in Canada, Australia, France, Germany, New Zealand, Sweden, the United States and the United Kingdom permit meaningful international comparisons of life after a Bachelor’s degree.

So how do Canadian Bachelor’s degree-holders compare? For one thing, those who decide to work (excluding those who work and study part-time) report the second-highest earnings among the countries examined here, along with the U.S. – around $45,000 annually.* German students with a “traditional degree” report earnings of CAD $55,000.

More interesting, though, is the proportion of Canadian graduates who pursue further education. According to Statistics Canada’s National Graduates Survey, 42% of Bachelor’s degree-holders from the class of 2005 had pursued a new course of study by 2007; only 62% of Canadians were working (some did both). No one, other than German graduates of “new” degree programs, studies as much after completing an undergraduate degree than Canadians – even those who were surveyed in other countries much longer after graduation were less likely to return to school.

Of the 42% of Canadian graduates who went on to pursue an additional program (the number of students who pursued any kind of schooling, either within the context of a program or one or more individual courses, is closer to 75%), only 16% had completed their studies when surveyed two years after graduation.

Of course, not all students are as gung-ho about pursuing post-graduate education. Looking at graduates at all levels, while 62% of life-science graduates and 56% of humanities graduates went on to pursue another program of study, the same was true for less than one-third of architecture and engineering students. Education graduates were most likely (64%) to pursue individual courses after graduation; however fewer than 20% undertook a structured program.

Whether a Bachelor’s degree doesn’t confer the benefits Canadians students anticipate or whether it cultivates a thirst for learning that can only be quenched in the classroom isn’t clear. What is certain, though, is that most Canadian undergraduates aren’t ready to stop studying.

* Australian graduates actually reported higher earnings – $61,000 vs. $45,000 in Canada and the U.S., but they were surveyed five years after graduation, compared to one to two years in Canada and the States.

May 07

The Deal

After twelve weeks and a marathon negotiation session on Saturday, it appears the bitter Quebec student strike is approaching its end.

The deal:

- Tuition increase of $1,778 over seven years ($127 per semester).

- Eligibility for student loans and grants expanded over and above existing plans.

- A provisional committee on university finance will be struck, consisting of six university representatives, four student representatives, two union reps, two business community reps, and one representative each from the province’s CEGEPS and the education ministry, plus a president, named by the minister. The committee will examine university expenditures on marketing, management personnel, travel and real estate, and is expected to report by December.

- Savings the committee identifies will be reduced from the ancillary fees universities charge;

- For the fall semester, ancillary fees will be reduced by $125 – the amount tuition will increase, meaning the net cost to students will not increase. (An idea credited to, of all people, Gilles Duceppe’s son.) However, should the committee not find savings, this money is payable to the university.

Given that all sides declared this a “win-win” deal, it’s worth examining what each gets out of it.

The Government

The headline win: tuition is increasing. The ancillary fee deal is clearly of secondary importance. Given that the latest poll had 68% of Quebecers supporting them (up from 61% at the end of March), the Liberals couldn’t budge on tuition.

Student Groups

Their strike led to important student aid concessions listed earlier as well as gaining students a formal role in reviewing university finances (though the figure of $189 million in savings FEUQ and FECQ have “identified” seem to have been pulled out of thin air). The students’ strategy was to purposefully delay the net tuition increase until after the election. FEUQ President Martine Desjardins emphasized Saturday the plan to make tuition an election issue and bank on a Parti Québécois victory. A very high-risk strategy.


Though they may not net any new funds for a while (and will be irritated by outsiders dictating management decisions), universities get the tuition increase they lobbied for, a stable funding arrangement for the next seven years (for now) and, eventually, more operating revenue – obviously preferable to a tuition freeze.

Quebec Students

No net increase until winter 2013 at the earliest. Substantial improvements to financial aid. And a fee increase that’s stretched out over a longer period of time than initially thought. It’s hard to imagine a tuition increase with a softer impact.

Our take? Everybody will walk away happy enough, which is good in the short term (assuming the deal is ratified by student associations, which is still iffy). But make no mistake about it, that finance committee is fertile ground for a number of very ugly battles to come. Having a debate about the kind of university system you want (which as we’ve previously said is worthwhile) is one thing; having accounts picked over by an external star chamber is another.


April 30

On Being on Strike

What does it mean to be a student on strike?

Recently, Concordia University announced that its board had settled on Ryerson provost Alan Shepard as its choice for president. Shepard, who’s had a very successful tenure at Ryerson, was unanimously recommended by a search committee that included student leaders. The prospective new president had hoped to engage in a public discussion with the university community prior to the formal selection taking place; unfortunately, the event was derailed by a handful of students, who used a megaphone to drown out any attempt at dialogue.

As the Montreal Gazette explained the protestors sought to disrupt the meeting because of a perceived slight from the university administration:  “[Lead protestor Alex] Matak then began reading out a long list of grievances, including the university’s refusal to alter the exam schedule to accommodate students who have been boycotting classes to oppose tuition-fee increases.”

Pretty much since the start of the strike 11 weeks ago, a major issue has been how the province’s CEGEPs and universities would ensure that, ultimately, students have the opportunity to complete the semester and move on to their next year in the fall. Earlier this month, Concordia studio arts professor Jessica MacCormack explained to CTV that instructors felt hung out to dry by university administrators: “I’m faced with the task of grading students some of whom I haven’t seen for the last four or five weeks.” (Concordia students must have their work in by May 30th, though the university has waived the $20 fee for work that is late or incomplete.)

Now, the Concordia incident isn’t special because of its effects on Alan Shepard. He’ll do fine one way or another; and heck, with his enthusiasm for learning French, he could always land a job with the Habs if Concordia doesn’t work out. Rather, what stood out was the level of self-absorption of the protestors, and the idea that everyone else’s schedule needs to shift according to the needs of the people who are boycotting their classes.

The entire point of a strike or boycott is that there is something tangible at stake. A strike that doesn’t run the risk of derailing the semesters of its participants isn’t really a strike at all. And that means that, contra the bullies who short-circuited Concordia’s forum with its new president, that schools must plan for the eventual end to this rocky semester.

A strike without risk has little in the way of meaning. Nobody wants to see the semester go down the drain. But that doesn’t mean it can’t happen.

April 20

A Closer Look at Student Debt (Postscript)

While the debt burden current students and recent graduates face may not be as difficult as aggregate student debt levels might suggest, there’s one final point worth making about student debt in Canada.

As we reported, student debt levels in the 2000s increased somewhat, but not as much as you might have thought. Notably, university debt didn’t keep pace with increases in tuition, likely owing to significant federal and provincial investments in student grant programs. Yet averages tend to obscure outliers. And there’s a major outlier when it comes to Canadian student debt: the Maritimes.

As Figure 1 indicates, the four provinces with the highest average student debt in Canada and the highest incidence of debt at graduation are in Atlantic Canada (Alberta being something of an outlier as far as the proportion of students with debt goes).

Figure 1: Incidence and Average Amount of Undergraduate Debt at Graduation in 2005, by Province (in 2011 Dollars)

Source: Statistics Canada’s National Graduates Survey

Seven in ten undergraduates in Nova Scotia, Newfoundland and Labrador, and New Brunswick completed their studies with an average of more than $34,000 in student debt in 2005. Figures from the 2009 Canadian University Survey Consortium survey of graduating students make clear that debt loads in Atlantic Canada remain higher than everywhere else.

So while the “average” Canadian university student graduates with about $25,000 in debt, the situation in the east is quite different – debt loads in the four Atlantic provinces are 25% to 35% larger than those in Ontario, which is (as usual) very close to the national average. Figure 2 looks at monthly student loan repayment amounts in select provinces, using current interest rates and debt figures from 2005; it also shows the percentage of income a student would have to devote to debt servicing.

Figure 2: Average Monthly Student Loan Payments, Class of 2005, in Select Provinces, and Proportion of Before-Tax Income Required to Service Debt (in 2011 Dollars)

Source: Statistics Canada’s National Graduates Survey, 2006 Census, CSLP Repayment Calculator and Author’s Calculations

A graduate in Nova Scotia would owe $100 more per month in Canada Student Loan payments than a graduate in Ontario. Moreover, because incomes are lower in the three Maritime provinces are below the national average, students graduates there face a double whammy: they owe more in student debt and they earn less to service that debt.

Once you consider the taxes graduates have to pay, those in eastern Canada are likely to be devoting too much of their income to debt payments. As we’ve written in the past, the economists Saul Schwartz and Sandy Baum have established a sliding scale of reasonable debt payments. The average graduate with debt in Atlantic Canada – not those at the extreme end of the distribution – is pretty close to failing the Schwartz-Baum stress test. By any measure, the student debt situation in Atlantic Canada is simply dangerous.

April 17

A Closer Look at Student Debt (Part 3)

As we saw yesterday, while student debt at graduation has been increasing, falling interest rates have meant that monthly student debt payments have made up a smaller share of a graduate’s income in recent years.

Of course means and medians only tell part of the story. While it may be true that the average borrower was better off in 2007 than in 2002 despite graduating with more debt, the same can’t be said for every borrower. As Figure 1 points out, the proportion of graduates reporting difficulty repaying their loans has hovered around 30% since 1997. It’s worth noting that the federal government expanded interest relief programs in the 1998 budget as part of a series of measures to tackle student debt. Since debt burdens have been declining in recent years, it’s unlikely the situation has worsened.

Figure 1: Percentage of Graduates Reporting Difficulties in Repayment Two Years after Graduating by Type of Degree, 1988 to 2007


Source: Statistics Canada’s National Graduates Survey

A ten-year retrospective on the graduating class of Canada Student Loan borrowers from 1995 offers two important insights. First, graduates who encounter challenges repaying their loans tend to do so soon after finishing school; 90% of defaults occurred within three years of graduation. Second, default (i.e., when students miss three payments or more) tracks graduate income, not indebtedness. While the debt load of students who defaulted was similar to that of students who did not, their income was much lower.

So where should student aid policymakers address their attention? As we’ve seen, rising debt levels can be more than offset by relatively low interest rates. But if interest rates rise, especially quickly, graduates may find themselves in trouble. Enter programs like the federal Repayment Assistance Program, which sets payments on the basis of income (not outstanding debt), capped at 20% of the individual’s family income, and discharges debt after 15 years (10 for those with permanent disabilities).

Unfortunately, borrowers must apply for RAP, meaning they must be aware of it. A 2006 paper looking at the CSLP’s interest relief program found that only 45% of eligible beneficiaries of interest relief took advantage of the program. In particular, borrowers on social assistance and with large families (i.e., those unlikely to have family members who can pay their bills) were relatively unlikely to apply for support.

As my colleagues have noted, the current student aid system works well because interest rates are low. A hike in rates, though perhaps not imminent, could raise the debt burden and cause government expenditure to balloon, upsetting the careful balance that currently exists.

April 16

A Closer Look at Student Debt (Part 2)

On Friday, we looked at the evolution of average monthly student loan payments since the 1980s. Though debt has increased considerably during the past thirty years, it’s been pretty stable over the last decade.  Meanwhile, a major decline in interest rates has caused student loan payments to drop from a peak of $323 per month in 2000 to $268 in 2011 at the Bachelor’s degree level (in inflation-adjusted dollars).

If student debt is up but the monthly payment burden is down, are students better off? The picture to date is incomplete. What’s needed is an appreciation for graduates’ ability to pay. Chiefly, we’d ideally examine how the proportion of a graduate’s income required to service student debt has evolved over time.

Fortunately, Statistics Canada has been surveying graduates for decades. Every five years, the National Graduates Survey looks at a class of graduate students two years after graduation, offering a portrait of graduate outcomes, including labour market transition, debt management and income.

First off, it’s worth noting that university graduates have relative success finding work. The unemployment rate for Bachelor’s degree holders aged 25 to 34 has stayed between 4% and 8% since 1980; while the rate has been slightly higher for college graduates, it has remained below 10% since the early 1990s.

As demonstrated in Figure 1, after dipping between 1992 and 1997, graduates’ salaries peaked in 2007. Unfortunately, there is no reliable, accessible data on earnings by education level and age group since 2007.

Figure 1 – Median Gross Annual Earnings of Graduates Working Full-Time Two Years after Graduation by Year of Graduation and Level of Study, 1988-2007 (in 2007 Real Dollars)

Source: Statistics Canada’s 1986, 1990, 1995, 2000 and 2005 National Graduates Surveys

As Figure 2 demonstrates, the percentage of income spent on loan repayments increased steadily until the start of the 2000s. The class that graduated in 2000 devoted less of their monthly income to debt repayment. Unfortunately, the absence of data on graduates post-2005 means we cannot fully understand the impact of the significant reduction in interest rates since then (from 9.77% in 2000 to 5.5% in 2011).

Figure 2 – Percentage of Monthly Gross Earnings of Graduates Devoted to Student Loan Payments by Year of Graduation and Level of Study, 1988-2007 (in 2007 Real Dollars)

Source: Statistics Canada’s 1986, 1990, 1995, 2000 and 2005 National Graduates Surveys

Assuming income levels for graduates have stayed constant since 2007, the proportion of income going to debt repayment would have dropped by one percentage point between 2007 and 2009 and by another half-percentage point by 2011.

So, to conclude, student debt is unquestionably up. But low interest rates and steady graduate earnings have meant that the student debt burden hasn’t changed much in since the 1990s, and is trending downward. The Class of 2005 graduated with same debt load as the class of 2000, but spent less money out of pocket on repayment.

On the whole, the situation appears reassuring. Tomorrow, we’ll conclude by examining ways in which debt obligations might become too burdensome, and explore what policymakers are doing to prevent that from occurring.

April 13

A Closer Look at Student Debt (Part 1)

A few months ago, we reported that increases in student debt in the 2000s did not keep up with tuition, owing largely to increases in student grant and bursary programs.

Yet the raw amount of student debt at graduation tells only part of the story. Thinking about debt in terms of balance owing can obscure more than it reveals; it’s also worth looking at debt from the lens of monthly student loan payments.

Given student loans’ fixed repayment period, monthly loan payments are based on just two things: the principal (the amount of debt at graduation) and the interest rate. Figure 1 provides the debt at graduation over time. Debt rose rapidly in the 1990s when loans were rising quickly and grant programs were being dismantled, but since then has stayed fairly steady. The most recent publicly-available data dates from 2009; to generate a figure for 2011, we have assumed a decrease in nominal debt of 4% based on observed changes in government aggregate lending over that time.

Figure 1: Average Debt Among Borrowers at Graduation in Canada for Bachelor’s Degree Graduates, 1982-2009 (in 2009 dollars)


Source: Statistics Canada’s National Graduate Surveys, Canadian University Survey Consortium Graduating Student Surveys

Interest rates on Canadian student loan programs are set by tacking a premium onto the prime rate. Between 1982 and 1990, CSLP charged interest of prime plus 1%; from 1995 onwards, it charged prime plus 2.5% (this is for a variable repayment rate; CSLP also offers a fixed rate of prime plus 5% that is much higher and, therefore, less frequently selected by students). A number of provincial programs offer lower interest rates; Ontario, for instance, charges just prime plus 1%. To keep things simple, we’ll use the higher CSL rate – just keep in mind that the figures we report below are, as a result, slight overestimates.

Now, while debt has been rising over the past few decades, interest rates have been falling. In the eighties, prime was consistently over 10%, while in the nineties it was mostly in the 7-10% range. Since 2000, as often as not it’s been below 5% and currently it’s bumping along around 3%. The resulting effect on student loan payments can be seen in Figure 2. 

Figure 2: Monthly Student Loan Payments in Canada, 1982 to 2011 (in 2009 dollars)

Source: Statistics Canada’s National Graduate Surveys, Canadian University Survey Consortium Graduating Student Surveys, CanLearn.ca repayment calculator, Bank of Canada

In other words, student loan burdens have been stable for over a decade and are even down slightly over the past five years thanks to the Bank of Canada’s recession-fighting policies. In fact, the average monthly payment is down 15% since 2006.

It’s easy to think of student debt as a single figure – the amount owing at graduation. And with inflation, that figure is always going to be rising. But a more nuanced approach tells a different – and less sensationalist – story.

Of course, an even more nuanced approach would also take into consideration graduates’ ability to pay. More on that next time.

April 12

How to Fix the Canada Learning Bond

Chances are you’re familiar with Registered Education Savings Plans. Though they’ve been around for 40 years now, it was only with the 1998 budget’s introduction of the Canada Education Savings Grants and their 20% top-ups of RESP contributions that they got big. Nowadays, parents contribute $3.39 billion per year to RESPs, and the CESG program hands out $667.1 million per year.

Of course, people pointed out at the time that the CESGs offered much more to families that could afford to set aside savings for PSE than for those who didn’t. So, in 2004, the feds created the Canada Leaning Bond, a one-time $500 RESP payment at birth to children from low-income families, followed by annual deposits of $100 over the course of the next fifteen years.

Yet the Learning Bond remains dwarfed by the CESG program, meaning the “free money” component of the RESP program still skews towards those who have complex investment portfolios and are good at efficiently managing them – and hardly need the most financial assistance for post-secondary education. On the flipside, families that could really use support lack awareness of these programs, and have few resources to set aside for future educational pursuits.

According to the formative evaluation of the CLB, “although more than half of Canadian parents are aware of some type of government financial assistance program, few are familiar with the… CLB.” The feds rely on banks to do a lot of the RESP legwork, since they offer savings vehicles, and banks aren’t super keen on chasing the business of low-income families. Meanwhile, the evaluation notes that “many of those who indicated that they were moderately aware or unaware of the CESG and CLB mentioned that they would have opened an RESP had they been aware.”

So why not make the CLB automatic? Instead of waiting for low- and moderate-income families to get the paperwork rolling, the Government of Canada would be wise to take the lead. Send each eligible family a voucher for $500 and a list of local banks that can set up an RESP. Include CLB and RESP information in every piece of communication to eligible families – their tax forms, their Universal Childcare Benefit cheques, their National Child Benefit forms, etc.

Don’t underestimate the nudge.

April 11

How Jean Charest Could Learn to Stop Worrying and Love a Tuition Rollback

If you’re Jean Charest, you’re probably starting to get antsy about the student strike jeopardizing the winter semester. But there’s actually a pretty simple way that the Quebec government could solve the impasse.

A few weeks ago, we explained how what universities charge (sticker price) is different from what students pay (net tuition), due to the multi-headed loan-and-bursary monster known as student aid. But loans and bursaries aren’t the only way to offset tuition – there are also billions of dollars of tax credits in our system as well. As my colleagues have explained elsewhere, real net tuition – once you factor in tax expenditures available to students – is actually 45% lower than the sticker price. Only nobody knows this because education credits only kick in months or years after students have left school.

So when tuition rises, students don’t actually pay anything like full freight – in fact, in Quebec’s case, students will be paying just 30 percent of the increase. For every dollar tuition rises, students will receive an extra 20 cents in tax credits from the Government of Quebec and an extra 15 from Ottawa. Of the $332 million that will be generated in new tuition revenue in 2016-17, students will therefore be getting $66 million returned to them in the form of a Quebec tax credit while Ottawa will kick in a $50 million increase in federal tax credits (is this fédéralisme rentable, or what?). On top of that, Quebec has already announced plans to kick back 35% of all new tuition revenue to low-income students via its bursary program. This will effectively freeze tuition for low-income students at a cost of $116 million.

(Actually, between the tax credits and the grants, low-income students will be better-off after the increase than they were before. Remind yourself of that next time you see a Quebec student leader spouting off on TV.)

Now, everyone who’s ever studied education tax credits has concluded that they are an inefficient way of funding education. Like tuition subsides, they have the same regressive distributional effects; unlike tuition subsidies, no one understands them.

So here’s an idea: why not just cut the Quebec tax credit a bit instead? It’s a $66 million piece of the fiscal puzzle that literally no one gives a damn about. So why not cut the rate and use the proceeds to roll back the tuition increase somewhat. Students will pay less up front, allowing their leaders to save a little bit of face, declare victory and move on. Universities will get the same badly needed funds, and the feds will still kick in 15 cents for every dollar of tuition increase that occurs.

Facile, n’est-ce pas?

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