HESA

Higher Education Strategy Associates

March 17

A Moment of Truth

So, next Tuesday, federal Finance Minister Bill Morneau will announce the new Liberal government’s first budget.  What should the PSE community expect?

Well, it’s going to be a deficit budget, we know that much.  Underlying weakness in the economy means that tax receipts are lower than expected, and the projection for a balanced budget in 2016-2017 that the Tories presented last year has now turned into a $12 billion deficit, even before an extra dollar was spent.  They’ll inflate that by another $6 billion in “prudence factors/contingency funds” (this will make subsequent recovery look better in, say, 2019-2020).  Next, add in the $10 billion in additional spending that was promised in the election, which they seem unlikely to walk back.  Then, add a couple of extra billion because certain promises weren’t costed accurately, and you’re pretty close to $30 billion in the red.

How much of that will end up heading towards PSE?  If you simply look at the Liberal manifesto (which I dissected here and here), pretty much nothing.  There will be some big, welcome changes to student aid worth noting – less tax credits, more grants, better repayment assistance – but the reform is specifically designed to be cost-neutral.  The manifesto promised exactly $0 new dollars to the granting councils, and a bit of money on commercialization, which would go to incubators, etc., rather than universities.  Transfers to provinces will go up exactly as they would have done under the Tories (and that was baked-in several years ago, so it’s not really a “new” expenditure).  Similarly, money for some programs like the Canada First Research Excellence Fund were projected to go up over time anyway – don’t be fooled by announcements of increases from the new government.

Where universities and colleges might be able to cash in on the Liberal Manifesto is in construction.  The new government has promised new infrastructure spending, and it’s possible we could see a carve-out of some of this money for “knowledge infrastructure”, in much the same way the Tories did with the KIP program back in 2009.

The real question is whether there is anything in there for universities and colleges if the Liberals decide – in the name of stimulus spending – to ramp up the deficit beyond $30 billion.  I don’t have a good sense of how likely this is, but there have certainly been some hints that the government may go this route.  And if this happens, all bets are off.  They won’t be constrained by the manifesto, and can do what they like.  In that case, we may see some larger investments in certain areas (personally, I’d be surprised if they didn’t find money to boost granting council spending by at least inflation, but that’s just a hunch).

However, I think we are unlikely to see two things.  First, we won’t see any new programs that weren’t clearly signaled in the manifesto (like the stuff around commercialization).  The new government simply hasn’t had time to think about more than fulfilling what they promised in the fall.  Second, I think we’re unlikely to see much of what I have called the “Fourth granting council” announcements.  Under the Harper government, we regularly saw one-off funding for specific scientific projects outside the tri-council structure.  My guess is we won’t see that on Tuesday.

If it is a minimal budget, it will be interesting to see how the PSE community reacts.  I mean, the Harper government usually received pot-shots even when it *was* investing in the area (see here for a recap, if you’ve forgotten).  Will the Liberals be given similar treatment?  I wonder.

March 16

Parental Contributions: the Policy Implications

So, yesterday I showed you some of the data comparing expected parental contributions for Early Childhood Education (ECE) and PSE, and how much more we ask of younger, poorer parents compared to older, generally wealthier ones.

This is frankly somewhat perverse.  Parents of children in ECE are usually at quite an early stage in their careers, and have little in the way of cash reserves.  They are often brand-new homeowners, or saving up to buy their first house or condo.  And then we ask them to shell out thousands of dollars – often over 20% of their disposable income – to put their kids in ECE.  In contrast, parents sending their kids to university tend to be older, more financially stable, and they also have the luxury of nearly two decades to plan and save for their children’s education.  Basically: why put so much burden on a section of the population that can’t pay, and so little on a population that can?

There are a few reasons for this.  One, it’s a generational politics thing.  If anyone can be counted on to vote, it’s the over-45’s, so politicians looking to attract votes at election time naturally find ways to create subsidies that appeal to this constituency (the on-going farce of the Ontario government providing grants to PSE students from “needy” families making $175,000 per year or more would be an example of this).

Two, it’s a lack of policy and coordination.  ECE and PSE are always run by different ministries, and each ministry develops policies around contribution rates without reference to the other.  But in some ways that’s just a symptom of a larger political issue; namely, that many people don’t frame ECE as a form of education, but rather as “babycare”.  Under that framing, ECE is a benefit to the parent, not the student, and that justifies the higher costs.

A third possible rationale is that for PSE, parents split contributions with their kids, so the lower amount makes sense because the total contribution is about the same.  That’s true on the face of it, but doesn’t work in terms of our comparison.  Our study looked at expected contributions specifically towards fees, and those are simply lower at the PSE level.  There’s just a lower ceiling on costs in PSE.

But here’s a little thought experiment.  Imagine you were designing a system to help parents financially throughout their parenting careers.  Is there any way you would front-end the highest costs?  No.  In fact, you’d likely do the opposite and give the larger subsidies to the younger, less affluent and less housing-secure.

Why can’t we do this?  Basically, it’s because we don’t design programs to help people across their life-courses.  We don’t think about how to trade-off benefits across programs that people will use across their lives.  We probably should – it would be kind of cool if some government could just yank some money from its PSE budget and transfer it to help parents with ECE costs; but that’s not the way bureaucracies work.  Budgets are based on what bureaucracies do, not on how citizens and clients live their lives.

So there’s no simple way to equalize expected parental contributions.  One way to at least alleviate some of the pressure would be for governments to let parents of children in ECE pay their costs over a number of years (something I wrote about back here).  For reasons of optics, you’d probably want to call it an extended payment plan rather than a “childcare loan”, but at least it would allow parents a bit of breathing room.

More ambitiously, one could imagine allocating parents a big pool of notional money at the time their child is born – imagine a mega-Canada Learning Bond – that they could use for any type of non-formal education.  Want to use it up for ECE?  Knock yourself out, but be prepared to pay more in net terms come time for college or university (presumably, loans would still be available for PSE students to cover basic costs).  Conversely, if you’re prepared to suck up big costs when your child is young, you’ll have more money left over to reduce costs for PSE.

Generally, I’m not a big believer in the Trudeau Liberal concept of a “squeezed middle class” (see Stephen Gordon’s columns in the national Post for more on that), but if any part of the population meets that definition, it’s young parents, particularly in Ontario, Alberta, and British Columbia.  If we want to think about helping that squeezed middle, we might want to think more about how to help that segment of the population, rather than giving yet more benefits to families earning over $100,000 as their kids go off to PSE.

March 15

ECE Contributions vs. PSE Contributions

Morning all.  Today, HESA is releasing a paper called “What We Ask of Parents: Unequal Expectations for Parental Contributions to Early-Childhood and Post-Secondary Education in Canada”, by Jacqueline Lambert, Jonathan Williams, and me.  The gist of it is: “Holy cow, we ask parents to contribute a lot more to ECE than PSE – why is that?” You can click here to read the whole report, or you can see the short version as an op-ed in today’s Globe and Mail.  What I want to show you in today’s blog is the wonky background stuff, because we’ve done a couple of things in this paper that no one has done before.

The paper is really built around the key insight that you can create “expected contribution curves” for both early-childhood education (ECE) and post-secondary education (PSE). In PSE, you can do this simply by looking at the parental contribution tables embedded in student financial aid programs, and then add in the value of tax credits.  You’ve seen me do stuff like this before, but here’s what it looks like for PSE:

Figure 1: Net-After Tax Expected Parental Contributions for Parents of Children in PSE, Canada 2015

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You can see pretty clearly what’s going on here.  Below about $15,000 the expected contribution is $0 – no contribution required, but income levels are too low for any taxes to kick in, so no tax credits, either.   As income starts to rise, net contribution falls because of the value of tax credits.  But then, expected contributions from the student aid system kick in: at about $45,000 in the case of Quebec, and around $60,000 elsewhere (as a result, despite low tuition, Quebec is the place where parents are expected to pay the most, if their income is between $45,000 and $70,000).  The exception to this is Alberta, where no parental contribution is required at all.  I’ll come back to that.

Eventually, this graph shows that contributions flatten out at a level equal to tuition and fees, which is the maximum possible contribution in this exercise.  Now, I’m pretty sure this will tick a lot of people off because at least some parents also support students for their living expenses, and we’re excluding them, and hence making contributions look smaller than they really are.  This is true – and we do it in part because actual living expenses are quite variable and difficult to model.  But that doesn’t mean we’re exaggerating the difference between expected contributions to ECE and PSE – after all, parents of children in ECE are paying for their kids’ living expenses too.  So we just call all of that a wash and focus on what parents are paying in fees to daycares and universities.

Anyways, for early childhood education you can draw very similar curves to the ones in Figure 1 by taking the average child care costs and applying the subsidies available to low income parents according to the provincial formula.  No one seems to have ever done this before in Canada, but it can be done.  You have to do it three times, because outside Quebec, prices tend to differ by the age of the child (infants are more expensive than toddlers, who are more expensive than pre-schoolers), but it is eminently doable.  Here’s what the graph looks like for infants, after tax deductions are applied:

Figure 2: Net-After Tax Expected Parental Contributions for Parents of Toddlers in ECE, Canada, 2015

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As you can see, the story for ECE contribution is quite a different from the one for PSE.  For infants, the minimum contribution is almost never zero.  In most provinces, parents hit maximum contributions at between $45,000 and $70,000 in family income – a level where parents of PSE students are usually not required to contribute a thing.  To say we as a country are inconsistent in the way we pay for these two types of education is putting it mildly.

Anyways, in the paper itself (well, in the appendices anyway) we generate province-by-province comparisons like this one below, for Alberta:

Figure 3: Effective After-Tax Required Contributions for Parents of Dependent PSE Students and Children in Child-Care, by Family Income, Alberta, 2015

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Yeah, this graph is pretty crazy.  This is what happens when you say there shouldn’t be a parental contribution to post-secondary education, which Alberta did about five years ago.  At $75,000 in family income, the gap between required parental contributions for an infant and for a university student is a little over $14,000.  Madness.

And finally, by multiplying provincial values by each province’s share of population, we can generate some national averages.  To wit:

Figure 4: Average Effective After-Tax Required Contributions for Parents of Dependent PSE Students and Infants in ECE, by Family Income, Canada, 2015

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Fun, huh?

Tomorrow: the policy implications.

March 14

Guaranteed Annual Incomes: the Student Angle

One hot topic that seems to be on everyone’s social policy radar these days is the idea of a “basic income guarantee”, or a “mincome”, or a “guaranteed annual income” (GAI – the term I will use in this post).  A recently-announced pilot project in Finland got quite a bit of press; the federal Minister of  Families, Children and Social Development, Jean-Yves Duclos – who examined the idea thoroughly in his previous career as an economist at Laval – says the idea is “worth studying”; and, the ever-seeking-to-expand-public-expenditure Ontario Liberals say they want to run a pilot test or two on the subject.  This leads me to ask: how will all of this affect students?

It’s hard to make judgements about possible GAIs because they come in so many different forms (this CCPA paper on Guaranteed Income is quite a good guide for the un-initiated).  Some are universal in that monthly cheques get sent to everyone, and others are simply income top-ups for the poor.  The size of the benefit may vary significantly, as may its integration with/replacement of other benefits, such as pensions.  At the high end, giving everyone over the age of 18 $800/month in a guaranteed income payment works out to about $268 billion, or 14.7% of GDP (that would be offset by reductions in spending OAP, social assistance, and unemployment insurance, but those three programs don’t come close to covering that amount, so it would require a whacking great tax increase).  At the other end, there are much more moderate and targeted systems, which I’ve seen costed in the $30-40 billion range.  Projected clawback and tax rates matter a lot here, and there’s simply not enough information to even speculate reasonably.

But one thing that seems certain is that there will have to be some major policy discussions around students and student assistance during the design phase of a GAI.  Would students be excluded because student financial aid programs already constitute a targeted form of assistance?  Or would they be included because the whole point of a GAI is that it is universal?  If students were included, what would happen to their student aid?

This would be an interesting challenge.  Student aid for dependent students is based on the idea that families should contribute something to their children’s education.  But what if everyone over 18 were getting some “income” of their own, or at least given an income floor?  Would we still keep these rules?  Would the grants we currently distribute disappear, in part to pay for the cost of the GAI?

One could imagine a very simple system in which the GAI is presumed to take care of living expenses, and student aid is left simply to take care of tuition costs.  However, a GAI would have to be very high for that to make sense: student aid living maxima average around $1,000/month in Canada.  If it were set lower, such a scheme might make students worse off.

Another question: if GAI *were* set sufficiently high so as to take care of living expenses, what would be the continued argument for any kind of student grants?  At that point, why not just ditch need assessment altogether and make loans available to all to cover 100% of tuition?  It would certainly make loan administration easier.

As you can see, the adoption of a GAI would have significant knock-on effects for student aid, which would need to be carefully thought through.  And this is not just a concern for a distant horizon: it’s also important in the near term for anyone doing a serious pilot project.  One of the serious problems with GAI pilots is that they provide participants with a set of new benefits, without making the adjustments to taxes and “other” benefits that a real GAI would require.  Results thus tend to reflect less the specific effects of a certain GAI design, and more the effects of giving people a bunch of free stuff paid for by outsiders.  This indeed was the principal critique of the well-known Manitoba “mincome” experiment in the 1970s.

A serious GAI pilot would almost certainly have to deny any student participants a part of their student aid entitlement, which politically might be quite difficult.  These are considerations well worth pondering as this social policy field moves forward.

March 11

How Much is a Brand Worth? Evidence from Doha

The Washington Post had an absolutely fascinating article earlier this week regarding the sums that the Government of Qatar is paying various American universities to be part of its set up at Education City.

For those who are unfamiliar with Education City, a slight diversion.  About 15 years ago the Qatari royal family got frustrated with the state of local education and hit on the idea of creating a world-class educational facility by inviting top US universities to come in and each run one faculty.  So Virginia Commonwealth was invited to set up a visual arts school, Georgetown came in to run the school for the foreign service, Weill Cornell did the medical school, etc.  (Northwestern, Carnegie Mellon, and Texas A&M also have campuses there).

Now this wasn’t your typical branch campus arrangement.  These institutions were not over there to make money by offering degrees for high prices.  Rather, the Qatari Royal Family was paying them big dollars to educate their students in situ (there’s a similar arrangement in place for the NYU and Sorbonne campuses in Abu Dhabi).  The universities themselves had nothing at risk: each one received its own gorgeous building fully paid for by the Qataris.

But nobody knew exactly how much they were getting until the WaPo article this week.  Using tax records, Department of Education data and freedom of information requests, the paper managed to lift the veil on the financial arrangements.  As it turns out, the Qataris are paying them, collectively, just under $405 million per year to operate their Doha campuses.  Weill Cornell rakes in the most (hey it’s a medical school) at $121.7 million, and Virginia Commonwealth the least at $41.8 million.

On their own, these are eye-watering figures.  But to truly get a sense of how insane this is, you have to look at what this translates to in per-student terms.  These are actually pretty small operations – according to the data I was able to piece together the six campuses collectively only educate about 2000 students.  So the actual expenditure per student is actually just over $205,000. 

Qatari Government Expenditure per Student, Education City Campuses

ottsyd 20160310 Doha Brand

In other words, these schools are making out like absolute bandits.  Free buildings, six figure per student incomes – this is heaven.  But the question really is what on earth possessed the Qataris to pay this kind of price?

It’s instructive here to look at what the Qataris are paying the College of the North Atlantic to run their community college a few kilometers away from Education City.  It’s the same deal – Qataris built the campus and pay an annual fee to CONA to run the place.  Details on the post-2013 CONA contract are scarce, but the first ten-year contract was worth $500 million so let’s just say it’s worth $50 million/year (the CONA Annual report gives figures in the $10-11M range, but I’m fairly sure that’s profit not operating).  But CONA educates more students than all the Education City campuses combined: with roughly 3000 in total – I make that out to be $16,500 or so per year – or about an eighth of what the cheapest institute at Education City is getting.

Now obviously, that’s not a bad deal for CONA (In comparison, the college receives about $84 mil in provincial grant in aid and tuition to educate its 8888 students in regular programming back in Newfoundland, which comes to about $9400/student), and obviously there are some differences in delivery costs for college and university programs, but they aren’t that big.  Georgetown’s campus is a pure social sciences operation, and at Canadian universities those rarely cost more than $15,000/student.  So where’s that extra money going?

Well, to student amenities, partly.  These places are like little educational wonderlands(check out Georgetown’s student life page).    But mostly, this is pure rent.  Unlike CONA, these American institutions have global prestige.  And that in a nutshell is what the Qataris are paying hundreds of millions a year for – the right to be associated with these institutions’ prestige.

That’s what brand is all about.  And apparently, it’s worth up to a couple of hundred thousand dollars per student.  Nice work if you can get it.

March 10

A New Focus for Student Unions

It’s that time of year when student elections are on and occasionally I get asked a question like “what’s the future of student unions?” and “what could student unions be doing better”?  These are good questions. Here’s my answer.

For the most part, student union budgets go into providing “services”.  Often, an awful lot of this ends up simply paying for light, heat and maintenance of student union buildings.  Big chunks also go to managing and overseeing the vast number of clubs.  This is irritating, nitpicky stuff, but it’s what most students actually find useful about student unions, so it’s probably money well-spent.

As a result a fairly small proportion goes in to actually representing students, which is odd since in theory that’s the purpose of student associations.  And the majority of that money goes to the external/government relations portfolio to talk to government.  Only a tiny fraction of funds in student unions goes to representing students inside their institutions.

And yet representing students to their administration is the one thing students can’t count on anyone else to do for them.  Lower tuition?  Any number of outside groups can argue for that.  Actually changing things inside an institution to improve the standard of education?  Only students can do that.

The number one issue for most students today is the fear of not getting a good job after graduation.  There’s not a whole lot student unions can do about that directly, but what they can do is put a lot more pressure on institutions to make sure they are as well-prepared as possible.  They can push institutions to deliver experiential learning.  They can push administrations to look at how to display co-curricular records on transcripts.  They can push faculty and departmental units to engage more with the labour market and adjust teaching and assessment accordingly.  These are all things which student organizations could do (but usually don’t) in a co-ordinated, effective, and meaningful way.

One of the reasons student leaders don’t focus on this area is because victories – when they occur – are so slow in coming.  It’s a rare student politician who can push a change in academic process or planning and expect to see a positive decision within the one-year lifespan of his or her career as an executive.  Student unions, by nature, are after quick hits.  But this is where provincial and national organizations like the Canadian Alliance of Student Associations and the Canadian Federation of Students can play a role: student leaders there have slightly longer tenures and are thus able to focus on longer-term issues.  For instance, in the UK, the National Union of Students puts a lot of work in on helping student associations work on quality assurance within institutions.  Now that’s somewhat easier to do in the UK than here because quality assurance processes are a lot more transparent, public and standardized over there.  But it’s not impossible to imagine it happening here.

Imagine local student unions spending time engaging their members to find out what kinds of outcomes they want from their time in university.  Imagine them spending time translating that into real policy options within the institution.  Imagine national student organizations spending time training people at the local level, teaching them how to understand university administrative and political structures, how to talk “Senate-ese”, and how to be effective champions of curricular change.  Imagine local student organizations putting time and effort into making sure that every student on every periodic review knew how to advocate effectively for change during the review process.

(Actually, if they were smart, universities themselves would get on this effort: increasing the number of students who can make intelligent contributions to university governance activities can really only be to the good).

To sum up: Canadian students have talked for years about access.  Less frequently have they really faced up to the question: access to what?  It’s past time they engaged more on this question, and just as importantly, empowered their members to act effectively in this area.

March 09

Better Know a Higher Education System: Jordan

I’ve had occasion recently to take a deeper look at higher education in a couple of Arab states, and one system I’ve found to be especially fascinating is that of the Hashemite Kingdom of Jordan.

Jordan is a middle-income country (gdp/capita = $12,000 or so), but one with a lot of problems on its hands.  Not only is it dealing with a multi-million refugee flow from neighbouring Syria, it has also lost a huge amount of remittance income as low oil prices have hit the Gulf.  So there isn’t a lot of money for higher education: in fact, public expenditure on higher education is only about 0.3% of GDP, which makes it one of the lowest-spending governments in the world as far as higher education is concerned (the Gulf States are lower but they are spending off a much lower base and of course are only concerned with educating a small fraction of their population).

So you’d kind of expect higher education there to be a shambles.  Except it’s not.  It has participation rates that are right about average for a country at that level of development.  Compared to most OECD countries, it is heavy on science and technology programs – its distribution of students by field of study looks more like Korea or Germany than it does like Canada or France.  Among Arab countries it has a relatively high research profile and almost alone among countries with GDP/capita under $15,000, it places two universities in the Times Higher Education top 800 rankings.

How does it manage all this?  Simple: tuition fees.

All Jordanian student pay tuition.  Under the restrictive way students enter university, the students who do best on their high school exams get their pick of programs at the more prestigious public universities at below-cost rates (about US $1650).  Poorer performing students simply get assigned to wherever there is space.  If they don’t like it and want to study something else, they have to pay a higher price (often  around US $4000) at public universities, or they head to one of the private universities (between $4000 and $5000).  Add all this together and what you get is a country which devotes a little over 2% of GDP to higher education in the form of tuition fees.  That puts Jordan in some pretty rarified territory since only Chile and South Korea have ever hit this level (both are slightly lower than that today).  And in total it means that the tertiary ed sector in Jordan receives about as much in GDP terms as Canada’s does.

Total (Public & Private) Spending on Tertiary Institutions, as a Percentage of GDP, selected countries, 2011 or latest

JordanSpending

Now, what’s a little odd about the Jordanian system is that it has achieved this while keeping the higher education system mostly in the hands of public universities.  There are private universities but they only educate about a quarter of all students – in both Chile and South Korea, private institutions educate about 80% of tertiary students.  So Jordan is somewhat sui generis as a developing country where public universities are essentially privately funded.

It’s also sui generis in that it has no functioning system of student aid beyond a few scattered scholarships.  All these costs are being borne directly by families, without the help of any student loan program or system of fee waivers for poorer Jordanians.  Although there are no studies on how this situation is affecting access to Jordanian universities, it’s reasonable to assume that the barrier is a pretty severe one and that the system as a whole would be much better off with a decent system of loans and grants.

But of course that would mean making new government investments in an area which allows the cost burden to be shifted but doesn’t directly help universities.  And universities keep clamouring for more money (as they usually do).  That may seem a bit ungrateful in a country which is among the world leaders in university income, but of course since they operate in an international environment, they are paying world prices for scientific equipment and libraries, and above-the-odds in local term for academics as well.  Simply put, 2.4% of GDP doesn’t go as far in Jordan as it does here.  And so they clamor for more.

Jordan’s going through a rough period right now and the likelihood of a lot more public money showing up anytime soon is pretty remote.  So development, if it occurs, is going to have to happen through judicious management of what effectively is a system entirely dependent on fee-paying students, just like South Africa and Chile did. 

It’s an experiment that bears watching.  And it’s another reminder that in some contexts at least, tuition fees are what create educational opportunities, not deter them.

March 08

The Coming Cost Debate in Ontario

Today I want to think about how the new Ontario system of student assistance is going to play out.  I think there is the potential here for quite an interesting and useful debate; but the timetable is somewhat tricky.

As you will recall, the Government of Ontario is rolling out a plan to provide enough grants to fully offset tuition in most university and college programs for students from families with incomes of less than $50,000.  That’s going to happen by 2017-2018.  But the really interesting thing they want to is what they call “net billing”.  It’s going to roll out sometime in early 2018 for students starting in the 2018-19 year.

Until now, student aid in Canada has worked on the fairly bonkers premise that you don’t need to know anything about your student aid package until after you’ve applied to and been accepted by an institution.  Mostly, that has to do with Canadians governments’ instinct to make things easier for themselves more than for clients.  You see students apply for college/university right around the time that governments make budgets (i.e. January-March).  Governments like to have the flexibility to change programs entirely at the last minute, and so prefer to make students wait until after budget season to apply for the next year’s aid.  What Ontario has done is say “that’s stupid”, and will now accept applications a few months earlier so that students’ aid request can be processed at the same time as their applications.  In effect the province has guaranteed that henceforth changes to aid are going to have to be announced a full application cycle before they take effect.  Result: henceforth, students will see on their acceptance letter what tuition is, what grants they will receive, and what “net tuition” is.

Now in the short term, this will work extremely well for the governing Liberals because by a COMPLETE COINCIDENCE (no, really), the next provincial election is scheduled for Spring 2018.  So tens of thousands of students and parents will be receiving these letters announcing clear, accurate (and low) net prices right before voting.  Amazing how that happens.

But in the slightly longer term – say the first twelve months of a new government, when some serious decisions are going to have to be made about paying off the province’s world-beating debt – there’s going to be another debate.  Because the data that feeds into those admissions letters will be in universities’ hands.  And they are going to show in excruciating detail how much public subsidy is going to people who don’t really need it.

Think about the histograms the Council of Ontario Universities will be able to produce.  They’ll be able to show, by income level and field of study, how little families are actually paying.  And they’ll be able to do it not just in reports for wonks like me, but also to parents in the actual acceptance letters.  “After grants, you pay: $1,000.  Actual cost of child’s education: $18,000.  Degree of subsidy: 94.5%”

For families under 50K, the average payment will be zero (which is about where it should be), and the figure will show 100%.  But families around $100K, whose net tuition payment might end up being $2000 or $2500, might be surprised to learn that they are being subsidized to the tune of 88-90%.  And families at $175,000, subsidized at perhaps 65%?  Hmmmm.

I don’t think many people – other than say, the Canadian Federation of Students and their wilder-eyed allies – genuinely believe that tuition for children of wealthier families should be free.  Most people agree that there should be some sort of net price slope, running from zero for students from poorer families and upwards as family income increases.  There’s no consensus about where the threshold for going above zero is, and no consensus about what the grade of the slop should be.  That’s mostly because we’ve never had data to look at the question properly before. 

But soon we will.  And that is going to kick start a discussion about who might be able to pay more, especially in times where governments are apparently no longer prepared to hand new money to universities and colleges.  Only this time, no one is going to be able to make misleading arguments about tuition and how it affects the poor, yadda yadda because  a) everyone will finally understand how little low-income students pay and b) because proposals to raise fees will explicitly be made in terms of net fees, and can be targeted specifically to on those families who can pay.  In fact, to start with they won’t be phrased as tuition increases at all, they’ll be phrased in terms of diverting some subsidies from (better-off) individuals to institutions.

And that’s all good.  We will -finally- have informed debate.  Expect the summer of 2018 to be particularly interesting, policy-wise.

March 07

What’s Next for Student Aid?

On the day of the Ontario budget, I half-sarcastically lamented on twitter that since the budget adopted so many good ideas that I (among others) had pushed over the years that, what was there left to write about? But having now had a few days to think about it, it’s occurred to me that there is still a lot of room left to innovate in student aid. So, herewith, the policy agenda for the next decade or so:

1) Nine (well, eight-and-a-half) provinces to go
The federal liberals started this movement by agreeing to ditch some tax credits and re-invest them in up-front grants (we’ll see how that promise pans out in practice on March 22). Ontario went a step further by taking all its back-end subsidies (loan remission, tax credits) and putting them into up-front grants and setting up a system to tell students their net tuition at the time of acceptance. That’s fantastic, but what about the rest of the country? Sure, Quebec is part-way there (they’ve got rid of back-end subsidies but haven’t got round to doing the net-price thing yet), but everywhere else is still stuck in the old system. It’ll take 4-5 years to get everyone on board with the nex orthodoxy. That’s job one.

2) What about mature students?
In the recession of the early-mid 90s, governments were falling all over themselves – rhetorically at least – to help lifelong learners. You know, people in their 30s and 40s who are trying to improve their lot through education and need help. But it’s been years since any help went their way: instead, all the dough has been going to students 18-22 years old, in large part because these investments are blatantly framed as ways to buy their parents’ votes. But the pendulum has swung too far: barriers are substantially higher for older students than younger ones, and it’s time to redress that balance.

3) Fixing Interest Rates
Currently, Canada charges students zero interest (i.e. negative interest in real terms) while they are in school, and then charges 250 basis points above prime (or about 400 basis points over the government cost of borrowing) while in repayment. Think about who wins and loses in that scenario: people who repay quickly do very well, while people who take a long time to pay do badly. But there is a better solution: many European countries such as the Netherlands simply charge a single rate of interest equal to the government rate of borrowing (which is substantially below prime) throughout the life of the loan. Yes, it means students graduate with somewhat higher loan principals – but it also means those principals are significantly easier to service. We should do this.

4) Improving repayment
I’m pretty sure that eventually, we are going to end up with some kind of repayment through the tax system. It will be complicated because both tax and student aid policy are shared fed-prov, which will create the odd nightmare. And assuming that we want to keep positive interest rates for loans in repayments, there will be a lot of arguments about the extent to which repayment should be based on current mortgage-style amortization (which usually pays off the interest-bearing loan more quickly) and to what extent it should be a pure function of income, as it is in New Zealand, Australia and the UK (where income-contingent loan repayment may be insufficient to pay the interest on the loan, thus sometimes resulting in what is called “negative amortization”). But you know what? Who cares? At the end of the day, loan collection through the tax system is the only thing that will make all our attempts to help low-income borrowers in repayment actually work properly for all.

So, still lots of work to do after all. Keep those sleeves rolled up, good student financial aid people!

March 04

A New Logo for Canadian Higher Education

Last week, the government of Canada announced to great fanfare (Hip Hip Hooray! Caloo Callay!) that Canada has a new international education brand.  They actually meant “logo” not “brand”, but whatever – long past due because the old logo was terrible.  To wit:

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Ridiculous, right?  “Education in/au Canada”?  Most students who want to come study in Canada do so in order to improve their English, and Ottawa comes up with a logo that requires you to already be bilingual in order to understand it.  Mercy.

Now, here’s our new logo:

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Um… OK.  That’s a little bit better, I guess.  But who in their right mind thinks the Canada word mark and the CMEC logo belong on this thing?  Are they worried that prospective students in Izmir, Lagos, or Dnepropetrovsk would think less of us as a study destination if those logos weren’t there?  That some eager would-be student from Togo would begin to get heart palpitations about the potential quality of higher education in Canada if the word mark wasn’t there?  That a potential Colombian graduate student would interpret the lack of a CMEC logo as evidence of a scam?

But if you really want to shake your head in despair, take a look at the Study in Canada website, which is probably even dumber than the old logo was – note that despite the big announcement, no one seems to have found the time to actually update the logo on the website.  Anyways, the website is a monstrosity.  Fifty per cent of it is blank space, and its overall web sensibility would have been considered primitive even back in the MySpace era.  Literally, the only thing you can say about it is that it meets official federal government web guidelines.

And this, in a very real sense, is the entire problem.  The logo, the website – pretty much everything about our  international education effort – is centred around what makes sense for governments and their bureaucracies.  It is not centred around students.  Go ahead, take a look at the Study in UK website, the Study in New Zealand website, the Study in Australia website, or even the German DAAD website.  Do you see a lot of white space?  In the case of DAAD – an organization partially funded by the Germans states (provinces), do you see any CMEC-equivalent logos cluttering up the visuals?

No?  Me neither.  Apparently, the awfulness of Canada’s efforts in this area are unique.  But as all those other efforts show, it doesn’t have to be this way.  We can do better.  It starts simply by asking: “are we doing this because it will make sense to students?  Or to governments?”

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