Higher Education Strategy Associates

Category Archives: student aid

May 04

Diverse Sacrifices, Diverse Rewards, Diverse Policies

One of the trickiest things about developing smart higher education policy is that its clients are unbelievably diverse: privileged private-school educated 18 year-olds, first-generation students, working adults, etc.  And the returns to education are equally diverse: strong for Bachelors’ and Master’s Degrees but less so for Doctorates, often strong in professionally-oriented fields and less so in Arts (at least in the first few years).  Coming up with reasonable pricing and student aid policies that can be generally accepted as fair across in the face of all this diversity is a very tricky job indeed.

The first part of this was brought home to me recently when we saw the results of some research  conducted by British Columbia on mature students across Canada.  One of the questions asked was “what’s the biggest sacrifice you have had to make to go back to school”?  The sheer range of answers we got was astonishing.  At one end, there were answers like “I had to give up my gym/yoga membership”, or “I had to give up quinoa” (a high proportion of these, it should be said, came from British Columbia).  The most common response was that people’s social lives were negatively affected because they could no longer afford to eat out with friends.

But at the other end of the spectrum there were some pretty horrific responses.  People who had to pull their kids out of sports teams.  People choosing between rent and food, or rent and medicine.  People who had had spells of homelessness.   All told, the results showed that the several thousand student-aid receiving mature students surveyed, just short of ten percent had experienced a significant form of food or housing precariousness while being a student.

Simply put, there are students who really have very little need of extra help, and there are students who need a lot more help than they currently receive.  This is precisely why the kind of system towards which Canada’s student aid programs are evolving is a good thing: we are withdrawing support from better-off students and concentrating it among worse-off students.  Could we do better?   Sure.  In particular we could do more for the people I call “involuntary students” – people in their 30s or 40s who have cars and houses but who suddenly lose their job and need to re-train.  But the point is, we need more targeted aid, not less.  One-size fits all policies are unhelpful.

It is the same with respect to returns to education.  It is a simple slogan to say that education must be free, that education must not be commoditized.  But it is also a simplistic one.  Low prices (net or sticker) can make a difference in terms of attracting low-income students.  But they also provide huge windfall benefits to students in fields with above-average returns, and it’s really hard to argue that there is any kind of public policy rationale for pricing a public service in such a way that some students (say, in ECE programs) see a very low private return and other students (say, in Dentistry programs) see a very high private return.  There is a way to square this circle: it’s to charge different amounts based on the field of study, and deal with the negative effects of higher fees through income-targeted grants.  Although not all of Canada looks like this, it is more or less the way the system currently works in Ontario. 

The point here is simply this: higher education is not a simple field.  It has many purposes, many clients, many outcomes.  To make it work properly, the policies and regulations which govern it need to be sensitive to this diversity.  Any higher education policy which you can put on a button or a bumper-sticker is therefore likely to be either wrong or wasteful.  

March 29

Who Won and Who Lost in the CSLP Re-Shuffle

(Warning to readers: today’s blog is a long read about student aid policy.  Skip it if this kind of wonkery isn’t to your taste.)

Last week’s historic changes to the Canada Student Loans Program – which saw the elimination of the Education and Textbook Tax Credits, and an increase of 50% in Canada Student Grants – is a very complicated piece of policy to analyze.  Remember that there is no new money in this set-up: any new money given to one set of students through grants is money taken away from another set of students in tax credits.  So it’s reasonable to ask the question: “who won and who lost?” because governments sure as heck aren’t eager to spell this stuff out.

If you want to refresh yourself on the details of the tax credit/grant switcheroo, go back to our budget analysis document and read pages 2-6.  Got it?  Good.  Then we’ll begin.

Winners and losers get divided up along three axes: by geography, by “family” income, and by full-time/part-time status.  We’ll start with geography, and move down from there.

Quebec: Every single full-time student in Quebec loses $558 from the disappearance of the tax credits.  What they will get back is uncertain. The Canada Student Grants program does not operate in Quebec, so no one will “win” by getting money from that source.  Instead, the government of Quebec will receive something in the region of $500 million from the government of Canada over the next four years in “alternative payments” (that’s a rise of about 40% on what the province currently gets).  Will the government invest all that money in student aid?  We don’t know because the government is being non-committal at the moment.  If it does, how will it do so?  Again, no clue.  So we have literally no idea who the winners and losers will be in Quebec.

The Rest of Canada, Bar Ontario: Again, every single FT student will lose $558 in tax credits.  If they are considered “low-income” (I’ll come back to this), they will – once the changes are fully phased-in for 2017 – get an extra $1,000 in grants and thus be “up” on the deal by $442.  If they are not at all eligible for grants, they will be “down” $558.  What happens to the students in between – the so-called “middle-income students” – is a little unclear.

First, who are “middle-income students”?  The definition varies by province and family size (see Tables 10A and 10B here), but if you’re a dependent student from a family of four, it means (roughly) those from families earning between $45,000 and $85,000; if you’re a single independent student, it means those earning between $23,000 and $43,000 (most independent students are low-income and eligible for maximum grants, but not all of them take advantage of the program).

Now, if all you look at is the 2016-17 changes to Canada Student Grants (+$400), and you subtract the $558 in missing credits, you might think “holy cow, these middle-income students are out $158!”  Which, to be honest, I did briefly on budget night.  But the program changes aren’t ending in 2016-17.  In 2017-18, CSLP wants to stop giving out these grants as a step function, and smooth the curve, roughly like so:

Figure 1: CSG Value by Income Level, 2015-16 vs. 2017-18















(Caveats on graph: that’s for a family of four in Ontario; mileage may vary by province and family size, and we don’t know exactly what the smoothing formula will look like.)

This is a very different kind of picture.  Those just above the low-income/middle-income cut-off become massive winners – their annual grant amount will increase by almost $2,200.  However, at the other end of the spectrum, those just below the middle-income cut off – say, families making about $80K – will see changes of less than $558, and so need to be counted among the “worse-off”.

But this still isn’t the final story, because there’s another CSG change scheduled for 2018-19, which will involve extending the middle-income cut out-off somewhat (my understanding is that for our hypothetical family it will be slightly north of $100,000/yr).  That won’t help the people just below $80k, but it will make “winners” out of a number of people in the $80-100K range.

Figure 2: CSG by Income Level, 2015-16, 2017-2018, 2018-19















(Caveats on this graph are same as previous, only this time we have even less idea what the exact formula will look like.  Think of it as an artist’s rendering of a bunch of vague statements in the Budget and the Liberal Manifesto.)

Based on this, what we can probably say is that all independent students will end up as net beneficiaries (if they bother to apply for aid), as will all dependent students coming from families with incomes below $100K (bar a few with incomes in the $75-80K range).  Above that line, there will be losers to the tune of $558/year.

Ontario: The situation in Ontario is a little more complex because in addition to the CSL changes there are the similar changes to the provincial program announced in the February provincial budget.  Because the province is killing both its own education amount tax credit and its own tuition tax credit, every student (and/or their family) is losing $1,176 in combined tax relief.

Now, who actually wins and loses is difficult to tell at the moment because we really have no idea what the provincial formula will look like.  Based on a tiny sliver of information contained in charts 1.16 and 1.17 of the Ontario Budget, my understanding is that dependent students from families making under about $80,000 are net winners – in some cases by a thousand dollars, or even a bit more.  Above $110,000 it’s all net losers – students from families above this level will keep the grants they currently have but lose all their tax credits.  In between, the best guess is that all will be net losers; however, the exact amount of the loss will depend on the nature of the CSLP 2018-19 changes.

That’s dependent students – what about independent ones?  Here, it’s *very* difficult to tell.  Unlike the federal grants, current Ontario grants are restricted to dependent students, and the language in last month’s Budget is ambiguous as to whether independent students will have access to the new grants. I think it’s telling that none of the examples given in this Ontario budget backgrounder are independent students; this implies that the province simply hasn’t yet figured out what the rules for these students will be.  So for the moment we simply show how the winners and losers will break out among independent students.

(Nota bene: if you’re wondering why the Ontario change seems to have a worse winners-to-losers ratio than the federal one, it’s because money in the system is not conserved.  If you read the text of the budget carefully, you’ll note that some of the money from the eliminated tax credits is going to universities and colleges – students themselves will, on aggregate, receive less money in total after the change than before.  Less money = fewer winners.)

Part-Time Students:  You’ll notice that I’ve been focusing on full-time students: that’s because the calculus is quite different for the country’s half-million or so part-time students.  Part-timers receive a smaller amount of education and textbook credits: only $168 federally.  They all lose this amount; part-timers in Ontario will also lose an additional $100-200 or so depending on how much tuition they are paying.  The federal system makes up for this in a tiny, tiny way by increasing bursaries for part-time students – something which currently only about 13,000 students receive.  The Ontario system does not give money to part-time students at all.  So for this demographic, it seems that nearly everyone loses from the re-shuffle.

So, what do we conclude from all this?  Two things:

1)  Part-time students everywhere, and (possibly) mature students in Ontario, don’t do very well out of these changes.

2)  In the main, among dependent students at least, there will be a growing gap in net prices by family income.  In Ontario, families with below median incomes will see their net tuition fall by $1,000 or so; those with incomes in the top quartile will see an increase of nearly $1,200.  Basically, tuition is becoming a much more progressive user fee.  And that’s altogether to the good.

March 22

Marketing “Free Tuition”

With a major student aid reform almost certain to be announced in the federal budget today, it’s worth pondering how the Ontario Liberals have managed to get themselves into a bit of a mess with how they’ve marketed their own changes to student aid.

The Ontario reform, as you will recall, was a shuffling of money rather than an infusion of one (note: some of the shuffling was federal shuffling, not provincial shuffling – that is, the provincial changes are predicated on the feds making changes in today’s budget.  Nobody said that last month, but it’s true.  So if you’re wondering how today’s changes will affect the provincial changes, the answer is they’re already baked-in).

The province finally noted that it was spending a heck of a lot of money on grants, loan remission, and tax credits; so much so that some students were getting more in aid than they were paying in tuition.  And so it decided – wisely – that instead of getting beat up for having high tuition all the time, it could re-purpose all those different piles of cash into one big up-front grant so that it would be more obvious that “net” tuition was zero, or close to zero.

If you read the Ontario budget papers, all of this was stated in quite careful terms.  It’s replete with sensible, cautious, and accurate phrases like “Ninety per cent of dependent college students and 70 per cent of dependent university students from families with incomes under $50,000 will receive grants greater than their average cost of tuition.”  However, the Finance Minister’s speech was slightly less cautious: “For college and university students who come from families with incomes of less than $50,000, average tuition will be free”.  By the time that made it into the newspapers it became “free tuition for low- and middle-income kids”.  And it got such a decent reaction that the Liberal Party (as opposed to the government of Ontario) immediately started crowing about “free tuition” and placing Premier Wynne in front of banners with those two words on it.

This is problematic, as the Liberals themselves are starting to discover.  It’s one thing to want to give accurate information to students applying for university and college about how low their net prices actually are; it’s another thing to knowingly over-promise something.  Inevitably, there will be some students who think tuition will be free, when in fact grants are just getting bigger and are covering a greater percentage of tuition.  It probably won’t be that many students – the actual implementation date is a long way off – but in this kind of situation, it won’t take too many confused souls complaining to the papers in order for people to level the claim that the aid re-vamp is a fraud, and thus sour an initiative that was full of promise.

Basically, political comms people are awful.  Under no circumstances should they be allowed to try to make hay out of changes to complicated social programs.  Let’s hope the federal Liberals will avoid this kind of mistake.

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















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















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
















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













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 03

Income-Contingent Loans (Repaid Through the Tax System)

Every once in awhile, someone important says that what Canada/America really needs are income-contingent loans.  I usually reply, “we have income-contingent loans in Canada/America, that’s what the Repayment Assistance Program/Income Based Repayment program does”. To which the rejoinder is “no, no, that’s not income-contingent, what I mean by income-contingent is recovery of the loan is done automatically through the tax system, so you don’t run into all these messy issues around borrowers in repayment having not signed up for things”.

At this juncture, I could point out that the size of the loan payment and its method of recovery aren’t the same thing (I wrote a monograph about this about a decade ago), but I usually just keep my mouth shut because, really, my interlocutors have a point.  RAP in Canada and IBR in the US would both be much better programs if borrowers in trouble automatically received relief, instead of going through the tedious application/income verification process they do now, and the easiest way to achieve this would be to run repayment through the tax system, as they do in Australia, the UK, and New Zealand.

So why don’t we?

The New America Foundation investigated this question in a recent paper, and enumerated a number of challenges in moving to a tax collection system.  One of these reasons is specific to the US (they tax families not individuals, so setting the tax rate on an individual is awkward if he/she is marries), and need not detain us here.  The other reasons can basically be boiled down into two big categories.

First, how do you integrate employers – who do the tax-withholding in Canada – into such an operation?  How do they know how much to withhold?  How do they know when to stop withholding (i.e., when the borrower is finished repaying)? And are we actually going to require students to tell their employers about their outstanding loans?  Part of the issue here relates to people who do not have a single, full-time job that provides all of their income.  How does withholding work when students have two jobs?  Or when wages are not the sole source of income?   Of course there are fixes and workarounds to these questions, but every fix and workaround creates even more complication.  And complication is what ICR is meant to avoid.

(In Canada of course, we’ve got quite specific reasons why income-contingent loans are difficult: namely, most students are not receiving one loan, but rather two – one from the province, and one from the feds – and these don’t always have identical conditions.  You’d need to to align both levels of government across the country for this to work.  That’s not impossible, of course, but it’s tricky.)

But there’s one final reason why governments are reluctant to recoup debts through the tax system, and that’s for fear of damaging something called “tax morale”.  Basically, tax morale is a way of measuring one’s sense of moral obligation to pay taxes, or one’s belief that taxes contribute meaningfully to society.  A 2004 paper in the Journal of Economic Psychology examined the effect on tax morale of Australia’s Higher Education Contribution Scheme, which collects student debt (technically “contributions” rather than debts, but the distinction can be a bit fine). The result, perhaps unsurprisingly, was that students with HECS debt were likelier to have lower tax morale than those who did not.  That might sound trivial, but to governments, it is not.  Our system of taxation depends on voluntary disclosure and reporting.  Messing with that has big consequences; putter around with it at your peril.

None of this should be taken as a reason to not collect student loans through the tax system.  There are a lot of potential benefits to such a policy.  My caution here is simply that implementation will be complicated, may lead to different kinds of errors and difficulties (especially for individuals with multiple jobs), and have drawbacks in terms of tax morale.  For good reason, governments don’t undertake system changes with this level of complexity lightly; there would be a serious risk to service delivery if something went wrong.

Maybe, just maybe, this is the next big project in student aid, now that we seem to be getting the switching-tax-credits-to-grants thing right.  Just don’t assume that this would be a simple process.

March 01

When is Free Tuition Free?

You would be forgiven, over the past 24 months or so, for growing ever more confused about when tuition is “free” and when it is not.  The reason, in part, is that “free” tuition is in the eye of the beholder.

You’d think it would be as easy as saying “no fees”, but it’s actually not that simple.  What if, instead of a fee, there is a variable “contribution” or a gradate tax?  What if fees are charged to a minority of students based on their high school marks (as in most of the former socialist countries in Europe, and parts of Africa)?  What if fees are charged to richer students but not poorer ones?  Or, what if fees are waived for a limited number of years and then kick in?

And that’s just the issue of fee setting.  What if tuition fees exist, but grants or other aid are distributed to help some students cover the costs?  Or, how about if fees exist, and are refunded after graduation in return for some service? And, finally, how do we deal with objections – such as those from American academic, Sara Goldrick-Rab – that free tuition isn’t actually free unless you also cover living expenses?

(This is about where some will say: “education is never free; it always has to be paid for by someone”.  Which is true, but beside the point that I’m making here, which has more to do with retail price.)

And so, forthwith, a quick cheat sheet to all the varieties of “free tuition” available around the world:

Manitoba and Saskatchewan don’t claim to have free tuition, but they actually do have it, subject to certain conditions: essentially, anyone who finishes on-time and stays within the province for a few years to collect their tuition tax rebates will actually receive more money in grants and tax rebates than they spend in tuition.

Ontario has had “net free” tuition for poorer undergraduates for most of the last ten years.  Now, however, they’re actually calling it “free tuition” for dependent students under $50,000 (although there are a couple of caveats). This doesn’t change much in terms of dollars and cents, but the framing seems to matter.  At the same time, a substantial number of college students across Canada have this kind of “net zero” tuition due to a combination of low tuition and large tax credits.  As, indeed, do many students in cheaper 2- and 4-year colleges in the United States.  For instance, a number of US states, including Tennessee and Oregon, now have schemes to ensure that all students – in community colleges, anyway – who have financial need get grants that are at least equal to the amount of their tuition.

Chile goes a bit further than this.  Its new system of “gratuidad” actually waives tuition fees for university students (but not yet colleges or polytechnics) from families below the national median income, which accounts for about 25-30% of the student body.  Similarly, tuition fees in England between 1998 and 2005 were variable according to family income, and those with family incomes below £20,000 paid no tuition.

In most former socialist countries and parts of Africa, there are what are called “dual track” tuition systems.  Students who do well on matriculation or university entrance examinations are allowed to attend for free, while everyone else is charged a fee.

In France, there is an entirely public system of higher education, in which most institutions charge nothing; however, the “grandes ecoles” charge fees of €10,000 or more.  Ireland has “free tuition”, but still charges a whack of other fees, amounting to thousands of euros, which might as well be tuition.

In a whole bunch of countries too disparate to mention, there are public institutions that charge nothing, but also have significant numbers of private institutions that do charge tuition (Germany falls into this category, though the fee-charging institutions only educate about 5% of all students).  And sometimes, as in Romania, this overlaps with the “dual track” tuition system.

Australia does not charge fees, per se, but rather demands a “contribution” from graduates.  The amount of the contribution sure looks like a fee (it is a set amount of money per year of study, based on one’s chosen field of study), but if your post-graduate income never rises above a certain level (currently about $50,000/year), you never pay a cent.  (In a more roundabout way, this is also true in England, even though formally there are fees.)

Greece charges nothing at entrance, but provides essentially no assistance whatsoever with living costs.

Finally, Scandinavian countries charge nothing, and provide more or less all students with grants of varying degrees of generosity to cover living expenses (and loans to cover the remainder).

So there you have it.  Next time someone talks about free tuition, be sure to ask what they mean by “free”.

February 26

A Great Day for Student Assistance

I was going to stay off the blog this whole week (I need a reading week, too!), but there was a budget in Ontario yesterday.  A weird and wonderful (if somewhat under-documented) budget, which is going to change the way we think about student aid, tuition, and affordability in Canada for decades to come.

Here are the basics: all of Ontario’s different grants and loan remission programs are being merged together into one big up-front grant program (all the provincial education tax credits are getting merged in there too, though I haven’t seen that actually mentioned in there).

There is absolutely no new money here – in fact, there’s actually a slight reduction because some of the tax credit dollars are going to be diverted to institutions.  It is simply a re-casting and re-profiling of existing money, which – crucially – takes all those hidden, opaque and often-delayed subsidies and turns them into grants available at the time when tuition is due.   But what that means is that all those students who currently receive more in subsidies than they pay in tuition will actually be able to “see” this for the first time.  It’s mainly an exercise in re-packaging.

But boy, what a re-packaging.  The government is now announcing what we here at HESA have been saying for some time: in “net” terms, tuition is free for low-income students.  And now, all of a sudden, you have the government, the Toronto Star, and the Canadian Federation of Students all saying tuition is “free” for low-income dependent students.  It isn’t, of course.  Fees are the same as they always were, and the offsets are reasonably similar, too.  In most cases, students aren’t getting a whole lot of new money (to the extent students are getting extra cash, it seems to be mainly those in the $50-100K family income range, but it’s hard to tell because a lot of this is still pretty sketchy, and dependent on the federal Liberals following through on their promise to revamp tax credits and grants as well).  Ignore the hype: this is not about bold new investments, it’s about changing perceptions through simplification.

And yet, the biggest change on the perception front was something that was not actually in the budget, but rather was signalled to stakeholders in the budget lock-up.  Starting in 2018-19, OSAP will be moving its processes forward in time so that students can have student aid decisions at the same time they get acceptance letters.  This means that institutions will be able to do “net billing”.  So whereas, now, students get acceptance letters, a bill for tuition, but then have to wait several weeks to find out what kind of aid they will get, in future they will receive a letter saying “Welcome to University of X; tuition is $6,500, and you have qualified for $7,000 in grants”.  The difference this will make to perceptions of affordability is enormous, and it’s a hugely positive step.  Every other province should adopt this step, immediately.

Not everybody wins.  From what I can tell, students from families above $110,000 in income or so will be slightly worse off due to the disappearance of tax credits, as will some part-time and independent students.  The first of these shouldn’t bother anybody, but the latter should.  And if you’ll allow me a small kvetch, yesterday’s announcement is probably too focussed on traditional-aged students (whose parents vote), and not enough on the mature students who are probably the least well-served by the current aid system.

But that’s for another day.  For the moment, let’s just admire this as a bold piece of policy, which renders transparent an already-generous student aid regime and thereby makes it that much more effective.  Congratulations are due to the folks at the Ministry of Training, Colleges and Universities for cleaning away a couple of decades of kludges, and bringing some much-needed coherence to student aid policy.

And to their counterparts in Newfoundland, Nova Scotia, New Brunswick, Prince Edward Island, Quebec, Manitoba, Saskatchewan, Alberta, and British Columbia: this is the future. What are you waiting for?

February 17

Some Curious Student Loan Numbers

Every once in awhile, it’s good to go searching through statistical abstracts just to see if the patterns you take for granted can still be taken for granted.  So I recently went hunting through some CSLP annual reports and statistical abstracts to see what I could find.  And I’m glad I did, because there are some really surprising numbers in the data.

So here’s the really big take-away: the number of students borrowing from the Canada Student Loan Program rose from 365,363 in 2008-09, to 472,167 in 2012-13.  In just four years, that’s an increase of 29%.  Which is kind of staggering.  It’s therefore important to ask the question: what the heck is going on?  Where are all these new borrowers coming from?

Well, for one thing, we know it isn’t being led by a new wave of students in private, for-profit institutions.  In fact, the increase occurred across all types of institutions, with a slightly more pronounced growth among students in community colleges.

Figure 1: Growth in Number of Student Borrowers by Type of Institution, 2008-09 to 2012-13













It’s a different story when we look at borrowing growth  by province.  Here, we see a more straightforward – and somewhat puzzling – story: borrower numbers are up fairly substantially everywhere west of the Ottawa river; however, numbers are even, or down slightly everywhere in the Atlantic (note: because we are looking only at CSLP borrowing, there is no data for Quebec, which has opted out of the program).

Figure 2: Growth in Number of Student Borrowers by Province, 2008-09 to 2012-13












One thing that Figure 2 obscures is the relative size of the provinces, and thus the portions of growth in borrower numbers.  Ontario, where growth in borrower numbers has been 38%, actually accounts for over three-quarters (77%) of all growth in borrowing within the CSLP zone; in total, Ontario now accounts for nearly two-thirds (64%) of the CSLP loan portfolio.

You can’t explain Figure 2 in terms of economic fundamentals: neither the recession’s effects nor education costs were that different in the Atlantic.  To a considerable degree, what Figure 2 is really showing is population change: youth populations in the Atlantic are shrinking, and that is primarily why their borrower numbers are going down (Newfoundland is falling even further because of real declines in costs and – probably – because family incomes rose quickly in this period thanks to the oil boom).

To get a better look at changes in the borrower population by province, we need to look at changes in the percentage of full-time students who are borrowing.  Now, it’s difficult to do this because CSLP itself doesn’t calculate this figure, and doesn’t quite break down figures enough to do it accurately.  So below in Figure 3 what we show is the number of total borrowers (including at private vocational colleges), divided by the number of students enrolled full-time in public universities and colleges.  This will slightly overstate the percentage of students borrowing (borrowers at private colleges make up about 10% of the borrowing population, so mentally adjust the numbers downward if you would); also, the denominator is total students enrolled in the province, not originating in the province, so Nova Scotia’s figure in particular is an undercount because of all the out-of-province students there.  With those caveats in mind, here are the percentages of students borrowing across the country:

Figure 3: Percentage of Full-Time Students with Loans, by Province, 2008-09 and 2012-13














The percentage of students borrowing grew in every province except Newfoundland, Saskatchewan, and New Brunswick. But the real story here is Ontario, where the percentage of students borrowing jumped by nine percentage points (from 44% to 53%), which led to a national rise of seven percentage points (42% to 49%). It’s not entirely clear why there was such a jump in Ontario.  The recession there was not that much more severe than elsewhere, and student costs, though high, were not rising that much more quickly than elsewhere.  Part of the answer may be that in the last couple of years the new Ontario Tuition Grant has been in effect, which enticed higher-income students into the student aid system with its outrageous $160,000 family-income cut-off line.  But that can’t be the entire story, as growth in numbers was actually fairly steady from year-to-year.

What might be going on? My guess is two things.  First, student numbers are expanding in most provinces.  Almost by necessity, if expansion is happening, it is going to happen disproportionately among those who we traditionally call “underserved” (that is, the poor, students with dependents, etc.), who by definition are more likely to be eligible for student aid.  This is to say, what we are seeing here is not evidence of a problem, but rather evidence of student aid working exactly as it should, to expand access.

The second factor is what I call delayed recognition.  Back in the 2000s, student aid eligibility for dependent students was expanded enormously.  Essentially, we went from a situation in 2003 where most families saw eligibility for student aid end at around the $85,000-$90,000 mark in family income, to one in 2006 and thereafter where the cutoff rose to about $160,000 (the number varies a bit by province and family size, but that’s roughly the scale of the change).  However, much to everyone’s surprise, take-up rates barely rose, presumably because CSLP didn’t go out of its way to advertise the changes much.  What may be happening is that families across the country – but especially in Ontario – may finally be cluing in to how much assistance they are entitled to under the post-2006 rules, and acting accordingly.  In other words, this could just be an improvement in take-up rates rather than a deterioration in family and student finances.

November 20

Quick Takes on Student Aid Around the World

Three quick hits:

Islamic Student Loans in the UK.  Loans and Muslim students are always a hot topic.  That’s partly because there are a number of Muslim students who don’t like the idea of loans with interest (not very many, but enough to be noticeable), and partly because certain soi-disant “progressive” white kids like to use Muslims’ reticence about interest as an excuse to argue that loans are effectively racist, and therefore should all be replaced by grants (yes, really).  So it’s interesting to note that buried in all the hoopla of the recent UK Green paper on higher education is a firm commitment from the UK government that it will move ahead with offering Shariah-compliant loans, making it the first non-majority Muslim country to do so (Malaysia has had them for some time).

Now this isn’t wholly surprising; the government indicated about a year ago that it was headed in this direction, after a series of public consultations on the matter.  The results of that consultation are here, and anyone interested in student aid should read from about page 6 on, because it goes into some useful detail about how to design Shariah-compliant loans that are neither more nor less generous than “mainstream” loans.  In the end, it recommends a “takaful” system, which is basically a co-operative lending fund in which participants mutually insure each others’ liabilities (n.b., for true student aid nerds: the mutuality aspect actually makes this system somewhat resemble the Yale Tuition Postponement option, which I described back here).

I said four years ago that the Government of Canada should consider offering Shariah-compliant loans.  Now that the UK government, in conjunction with Islamic banking experts, has done the heavy lifting on this, it’s time to pick up that torch.

How Difficult is it to go Full Australian?  Many people admire Australia’s HECS system (or HELP.  Or HECS-HELP.  It’s all a bit confusing because they keep changing the name).  No fees required at time of enrolment.  No real interest on the “contribution” (let’s not call it a loan).  No repayments required until the borrower is making $50K/year.  Repayment tied to income after that.  And from a convenience point of view, the idea that collection is handled through payroll witholding is pretty sweet.

It’s a system that of late has attracted a lot of attention in the US, especially because its own income-based relief program (which is HECS-ish in the way that our own Repayment Assistance Program is) would work a whole lot better if relief was automatic, which effectively would require a payroll withholding system.  But making HECS work is actually pretty complicated.  It requires a certain type of tax system, as well as practices in tax collection, and they don’t necessarily translate well. The trade-offs required to do this – some of which would apply here in Canada too – were well explained in a recent New America Foundation paper called Promise and Compromise: A Closer Look at Payroll Withholding for Federal Student Loans.  It’s a useful reminder of how tough some of the practical issues in student loan collection really are, and how going “full Australian” is much more difficult than casual admirers appreciate.

Malaysia Gets Tough on Loan Defaulters.  Really Tough.  For years, Malaysia’s loan system, the PTPTN (which longtime readers may recall has it’s own quite excellent anthem, available here) has been a disaster where repayment is concerned.  When I was there four years ago, I worked out that the agency was barely recouping a third of its money on an NPV basis.  More recent investigations by local researchers come to similar conclusions.

The government has gradually been tightening the system, mostly by starting to squeeze out private higher education providers (quite numerous in Malaysia).  But now it has decided to get tough by actually imposing a travel ban on people in student loans arrears.  The ban apparently applies to about 600,000 Malays, or about 2% of the country’s population.  This is actually somewhat more draconian than Kenya’s practice of refusing to renew the passport of anyone in arrears on their loans.  Interestingly, all student loans in Malaysia are required to have a guarantor (usually parents), but the government actually thinks a travel ban on the kids is politically more palatable than asking parents to make good on their guarantee.  Which of course makes you wonder what the guarantee was for in the first place.

Have a good weekend.

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