It’s generally acknowledged that students from low-income backgrounds have trouble paying for education; that’s why across North America, they tend to get packages of loans and grants which are far in excess of the value of tuition. And that’s a good thing. But when it comes to people who are truly middle-class – that is, students near or just over the median family income, there’s a fair bit of debate – sometimes acrimonious – about how to assist them.
One view – one which I tend to subscribe to – is that most middle class parents are quite capable of providing some assistance to their kids. It’s not an emergency, out-of-the-blue expenditure; they’ve had 18 years to save for it. If there’s a liquidity problem, student loans are available which allow students to defer the costs until they have graduated and have a job.
The alternative view – proposed by the usual suspects here in Canada and in the United States by researchers like Sara Goldrick-Rab – is essentially that university costs have outstripped the ability of even middle-class to pay (a claim easier to make in the US than in Canada) and that therefore in the interests of a strong middle-class they need greater subsidy.
From a lifetime income perspective, if higher education are too expensive for families individually, they’re also too expensive for families collectively – unless the plan is to grab tax income from those families who don’t have kids or whose kids don’t go to higher education. That would probably be quite regressive. But I don’t think that’s primarily what proponents of aid to middle-class parents are saying. I think they’re actually making a liquidity argument: middle-class annual incomes can’t cope with a sudden rise in annual household spending that supporting a student in college or university for 3-5 years entails. That’s primarily an intertemporal liquidity argument – they have the money, they just don’t have it now.
Now, the most obvious way to deal with that is loans, but the objection is some variation of “debt is bad, debt = inequality”. I don’t buy that particularly (see here and here), but let’s assume there is merit in the argument. Is government subsidy the only way to deal with this? Answer: of course not. We have exactly the same issue with retirement income support, and the way we deal with it is through enforced savings through programs like the Canada Pension Plan.
As higher education edges towards becoming universal, the pension model of funding becomes at least worth examining. Why not create individual accounts for every child born and require parents to contribute a couple of hundred dollar a year through payroll deductions? If income is below a certain threshold, government could make the contribution on parents’ behalf (as indeed it does for low-income parents through the currently non-mandatory Canada Learning Bond program). That way, every family would know they had a lump-sum amount available once a child reaches age 18, without having to tap government coffers to support the middle-class who, on the whole, are able to pay for university/college if the payment process is extended sufficiently.
I’m not sure if I personally buy this argument: people tend to like the idea of saving but are less keen on making it mandatory. But I do think it’s a better idea than using tax-income to support the middle-class. That money should be reserved for helping the less-advantaged.