HESA

Higher Education Strategy Associates

Category Archives: tuition

April 20

The Politics of Unfreezing Tuition

Freezing tuition is a terrible policy.  Free tuition is actually a better idea.  At least it’s based on a particular theory of access and public expenditure.  A tuition freeze is just a decision not to take any more decisions.  It’s a recipe for drift.

And what’s worse, the longer you let policy drift, the harder it is to stop drifting.  Case in point: Newfoundland.

To recap: In 2000, the province of Newfoundland decided to reduce tuition by 5% a year over four years and then freeze tuition thereafter.  And it’s been frozen ever since, with the agreement of all political parties.  The ostensible rationale for this is that it improves access to post-secondary (though in truth participation rates remain well below those in Ontario, where tuition is 3 times as expensive); in practice, what it’s done is reversed the flow of student from Newfoundland to Nova Scotia, bringing home their own students and attracting a few hundred new ones.  

As long as some of those new students were staying in province and helping reverse the long-term population loss, that was probably a good deal for the province.  Of course, no one actually tracked this to see if it was true and the policy was working, but that’s cool – this is Canadian postsecondary policy and we’re used to never evaluating the success of a program.  But now that oil revenues have plummeted and unemployment seems headed back towards 20%, it’s harder to maintain that this is happening, and so the cost of the tuition pledge seems to outweigh the benefit.  And given the government is currently spending roughly 33% more than it is taking in tax revenue, time for a change of policy, right?

Wrong.  In last week’s budget, the government raised all sorts of fees related to apprenticeship, which tends to heart lower-income learners.  It cut student aid, turning part of its vaunted grants programs into loans, which also hurt lower-income learners.  And it cut $14 million from Memorial’s budget.  But God forbid it touch tuition.  Upper middle-class people pay that stuff. Nuh-uh, no way, not touching.

Actually it’s somewhat worse than that.  The government didn’t touch tuition, but instead started making noises about how Memorial has always had the ability to set it’s own tuition (nudge, nudge) and of course the government expected to do what was right for students (wink wink).  I mean, first of all this is nonsense – the tuition freeze promise has been formally written into every provincial budget since 2000 – and second of all it’s unbelievably cowardly.  Unable to muster the political courage to get rid of tuition on its own, the government is reduced to pleading for the university to do something (but maybe not too much) to help it out of a jam.  I suspect if Memorial weren’t so broke ($54 million in cuts over two years, if you include cuts to the pension plan) it would tell the province to grab a chair and then rotate at an ever-increasing speed around that idea.  I know I would.

But the point is this: even a new government, with a massive majority in the legislature, facing the biggest fiscal emergency in twenty years, and having the courage to cut all sorts of programs still doesn’t have the courage to touch tuition.  It will touch all sorts of things which hurt the less-fortunate, but not tuition.  The upper middle-class defends its privileges to the last.  Which is precisely why those privileges shouldn’t be given out in the first place.

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

Fig.1

 

 

 

 

 

 

 

 

 

 

 

 

 

(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

Fig.2

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 18

The Cultural Aspect of “Affordability”

In tuition policy circles, there are a lot of “grass is greener” perspectives: that is, people arguing about affordability based on foreign examples of either high or low tuition.  But one of the problems with looking at “affordability” of higher education in cross-national contexts is that affordability is a matter of perspective.  What’s affordable in one country often isn’t in another.  I don’t mean this simply in the trivial sense that some countries are richer than others.  Obviously a $3,000 tuition fee is more affordable in Canada than it is in Zimbabwe.  Rather, I mean it in the sense that students and families in different countries with similar standards of living have different views about what kinds of sacrifices they are prepared to make in order to send their kids to school.

So here’s one example: East Africa.  There, you have four countries with fairly similar higher education systems.  Each has one obvious “flagship” institution, and a mix of private and public institutions.  The private sector teaches about a third of all students in Tanzania, and about half in Uganda and Rwanda; in Kenya, the figure is between 10 and 15%.  I can’t show you average fees in each country because they don’t exist, but here’s a selection of fees at each country’s flagship institution, in USD, at current exchange rates, which gives you a rough idea of the relative fee levels across the region.

Table 1: Tuition Fees at East African Flagship Universities, 2015-16, in USD

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Now, let’s express those fees in terms of GDP/capita to get a sense of how “affordable” these fees are.  For comparison, tuition + compulsory fees in Canada are about 13% of GDP/capita.

Table 2: Tuition Fees at East African Flagship Universities, 2015-16, in USD (*Source: World Bank 2013)

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Finally, let’s talk about availability of student assistance.  All four countries have student loan programs.  Uganda’s is very small – only a couple of thousand loans per year, starting in 2015 – while Tanzania’s is the largest, serving somewhere between a quarter and a third of all students.  The other two countries are in between, though Kenya’s system more resembles Tanzania’s, and Rwanda’s is closer to Uganda.

Now, based on all that, what do you think access rates look like?  Most people would probably put Tanzania (cheapest, best student aid) at the top, and Uganda (expensive, least available student aid) at the bottom.  But here’s what enrolment rates actually look like:

Figure 1: University Students per 100,000 of Population, East Africa, 2015 or Latest

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A couple of caveats about the data.   Tanzania’s numbers are different from the others because nearly a quarter of its student body is enrolled at the country’s Open University, many of them in education programs.  Uganda’s numbers are somewhat lower because compared to the other countries, it has more tertiary students in non-university institutions.  But that aside, the real story is that Tanzania (richer, cheap tuition, better loan availability) is a lot closer to Uganda (poorer, more expensive, almost no loans) than it is to Kenya in terms of access rates.  And if you spend any time in the area, you’ll quickly learn something else: universities in Tanzania are far more likely than those elsewhere in the region to say they can’t expand without loans; the claim is that students simply won’t come if fees rise or loans aren’t expanded because “students can’t afford it”.  But on the face of it, that’s nonsense, as the costs for students elsewhere in the region are manifestly higher, and they are not thought to pose quite so severe a barrier.

The difference is entirely cultural, and has to do with collective saving mechanisms.  In Uganda, it is normal for a family to hit up their neighbours and co-workers for a few dollars each semester to help their kid get through school, which everyone does because they know that when it’s their turn to put a kid through school, the donation will be reciprocated.  In Tanzania, people will do the same to cover the cost of weddings or sometimes hospital fees, but not for tertiary education.  Locally, most people attribute this difference to the after-effects of the long period of socialism under President Julius Nyerere.  This view says that Tanzanians simply got used to government paying for everything, and citizens haven’t entirely adapted their thinking to the post-1990s reality.

I have no idea whether or not this is true, but it does beg some interesting policy questions: What’s the right policy to follow if a population has sub-optimal savings and investment habits?  Is there any practical  way to nudge a country from a Tanzania-ish state to a Ugandan one?  If not, are you stuck with permanently high tertiary education subsidies because households can’t be depended upon to contribute?

These are some serious questions, which have real implications here in Canada, too.  After all, wouldn’t Quebec universities be better off if Quebecers were a little more Ugandan and a little less Tanzanian?

Something to ponder, anyway.

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 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 19

The Dollar Quandary

If you haven’t been hiding under a rock these last few months, you may have noticed that the US dollar is on a roll.  And it’s not just on a roll in Canada, where the price of oil has reduced the value of our own currency; since mid-2014, the US dollar is up over 20% against a trade-weighted basket of currencies. This creates some interesting conundrums and strategy options for pricing international education.

The change in the dollar’s status means that everyone’s price has been reduced vis-à-vis those at American universities. If you’re a university in, say, Sweden, it doesn’t matter much because practically all of your competitors are European. Basically: if your price isn’t changing relative to that of your main competitors, then the fall of the dollar is fairly meaningless.

However, if the fall in the value of your currency is greater than that of your competitors, then this does actually create some room to maneuver. I was in Russia last week, where the fall in the value of the rouble (76:1 USD, down from 37:1 USD at the end of 2014) means that their product is now much cheaper, relatively speaking, than that of their competitors, and that makes them a more attractive destination.  As a result, the Russians are now marketing themselves as a “bargain” product because, let’s face it, Russian universities have a brand image problem after the disasters of the 1990s. Their strategy is to go low price, high volume, and admit as many Asian and Latin American students as possible.

That’s one strategy. But there are others. If you are an Australian or a British university with a reasonable reputation, you might ask why you should keep your prices constant in local currency. If you think your main competitors for international students are American schools, you might also think it makes sense to take advantage of your lower currency, and increase prices a bit. It won’t necessarily hurt you with recruitment, and you can make a little bit of extra money in local currency terms. Basically, in these situations, universities have a choice between marketing themselves as a “bargain” institution (take advantage of low price to increase volume) or as a luxury institution (risk volume to increase price).

Now in Canada we have a somewhat different set of issues at play, for two reasons. First, we actually have a lot of American students, institutional pricing strategies need to take account of that market. Second of all, unlike European universities, Canadian schools can be very sure that US institutions are a major source of competition, and hence we have more scope to re-price based on currency changes. So here’s the question: should institutions take the “bargain” route and keep prices steady in local terms, or a “luxury” strategy that sees us raise prices, or perhaps even start charging in US dollars?

Essentially, this is the choice every institution needs to make over the next couple of months. I think there’s a pretty clear case for Toronto, UBC, and McGill to move to USD pricing, and keep last year’s fees constant in USD terms (that is, raise them by about 20% in $CDN terms). Will they lose some applicants? Probably. But they have the brand power to deal with that, and the students for which they are really competing are going to be paying more anyways to go to an American university. And the prize is a big whack of extra cash.

For everybody else, it’s a trickier proposition. Some institutions – particularly if they are experiencing recruitment shortfalls (say Trent, or any one of a dozen Atlantic universities) – will probably see more benefit in going the “bargain” route, and aggressively going after students looking for a “cheap” North American experience. Others – Windsor, perhaps – might decide to take that pitch directly to American students. The institutions with the trickiest task are the other U-15 universities. They might be tempted by the USD route, but may be unsure if they had the brand power to make it work. Expect a period of experimentation, not all of it successful.

In any case, for those interested in looking at price elasticity as a function of institutional prestige, the next couple of years promise to be quite interesting.

February 16

Two Simple Reasons Tuition Rises Have Little Effect on Access

It’s that time again, when boards of governors are thinking about tuition for the upcoming year; and as a result, people will be rehearsing their arguments for and against tuition increases.  The basic argument against is the rather simplistic, “higher fees means lower participation”.  And it’s wrong.  Here’s why:

The argument essentially relies on that thing everyone remembers from first-year Econ, where you draw your first supply/demand curves.  When price falls, demand rises; conversely, when price rises, demand falls.  Therefore, a rise in the price of tuition must cause a drop in demand, right?

Well, no.  For this to happen, the starting price must be a market-clearing price – that is, the price that the market will bear.  But in Canada, there are very few universities where this is the case.  In most instances, tuition is already so subsidized that the price is well-below market-clearing levels.  So it’s possible to raise the price without actually affecting aggregate demand.

Think about it: even while we worry about the effects of a price change of a few hundred dollars, we also talk about how great higher education is, and how it makes a difference of tens or hundreds of thousands of dollars in lifetime income (depending on who’s doing the counting, and how).  Well, students aren’t stupid: if there’s an investment that’s going to bring them tens or hundreds of thousands of dollars, a matter of a few hundred dollars isn’t likely to deter them.  Want a prime example?  The massive tuition hikes in the UK in 2012 – which amounted to about $10,000 per year – made almost no dent in access rates (and to the extent they did, the effects were greater among the wealthy and white than the poor and non-white).  Want more data on this?  See here, herehere, and here.

(It’s a different matter when students don’t perceive the benefits that way, which is possible; however, the correct answer in that case is to get the informational issues sorted out.)

Ah, you say.  But what if it’s not a price/value issue?  What if it’s a liquidity issue?  Sure, students understand the value of the degree, but the issue is that they can’t put the money together in the short-term.  And tuition fees make it harder to make ends meet.

Well, that’s a fair point.  Students are cash constrained.  But remember that in Canada, we hand out north of $10 billion in loans, grants, tax credits, and scholarships to students every year.  And half of our students work – maybe not the most ideal source of money for school, but it’s still a mainstay for many learners, and a source of extra income if necessary.  Most students can cover extra costs if need be, which explains why, in point of fact, enrolment over the past three decades has tripled even as tuition has risen by roughly the same.

This is not to say that tuition can be raised with impunity.  Our student aid system is generous, but also it is complicated and opaque, and in need of reform. Some students already receive maximum aid: these students may have significant difficulties in meeting tuition rises, and offsetting measures need to be taken to protect them.  And just because tuition rises in general tend not to have much effect, this doesn’t mean that all fee increases work for all institutions: depending on what local competitors are doing, tuition hikes can sometimes be counterproductive.

In other words, there are good reasons to proceed with caution on tuition fees, to set aside extra funds for vulnerable students, and urge faster reform of student aid.  But they aren’t good reasons to forego a tuition rise altogether.

February 04

Lessons from Scandinavia on the Value of Tuition Fees

Whenever you hear somebody complaining about higher education funding in Canada, it’s usually only a matter of time before someone says “why can’t we be more like Scandinavia?”  You know, higher levels of government funding, no tuition, etc., etc.  But today let me tell you a couple of stories that may make you rethink some of your philo-Nordicism.

Let’s start with Denmark.  The government there is trying to rein public spending back in from a walloping 56% of GDP, and bring it back down to an only slightly less-imposing 50% by 2020.  And it’s doing this while the economy is still weak, and while oil prices are falling (Denmark has some North Sea oil so, like Canada, it tends to see low oil prices as a negative).  So cuts are on the way across many services, and higher education is no exception: universities there will see cuts of 2% in their budgets for each of the next four years.  Over to Finland, where it’s the same story in spades.  Nokia as a technological saviour/massive boost to government coffers is long gone, and economic contraction in Russia is hitting Finnish exports hard.  With the economy declining and the government trying to stay out of debt, the government there also laid out cuts to many services, including higher education: there the hit is a cut of roughly 13% out to 2020.

Now, in North America, when you hear about cuts like this you tend to think “oh, well, at least the government will let institutions make some of it back through tuition, either by increasing enrolment, or raising fees, or both”.  And in general, this attenuates the impact of funding cuts (unless of course you’re at Memorial in which case you are plain out of luck).  But remember, these are free-tuition countries.  By definition, there is nothing that can attenuate the cuts.  And so that 2% per year cut for the next four years in Denmark?  The University of Copenhagen has since announced a first round of cuts equaling 300M DKK ($62 million Canadian), equal to about 5.5% of the university’s operating budget, and that will involve cutting 500 staff positions.   Those cuts in Finland?  The University of Helsinki has decided to cut almost 15% of its staff positions.

Total reliance on government looks good on the way up; much less so on the way down.  That’s why tuition fees are good.  You know students will pay tuition fees every year, which makes them more dependable than government revenue.  Fees balance the ups and downs of the funding cycle.

Another thing tuition fees do is to provide an incentive for institutions to accept more students; if institutions can’t charge tuition and aren’t funded according to student numbers, their inclination will be to accept fewer students, thus undermining the “access” rationale for free tuition.  And this seems to be the case in allegedly-access-friendly Sweden, where enrolment in first and second degree programs has actually been in decline over the past few years.

Total Bachelor’s/Master’s Enrollment at Swedish Universities, 2007-2014

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I know what you’re wondering: is it a demographic thing?  No.  The 2015 version of the annual report, Higher Education in Sweden (which is a great report by the way… one of those documents you wish every country could publish), makes it clear that the ratio of applications-to-acceptances for students with no previous post-secondary education (i.e. 18-19 year olds) has actually been rising for the last few years (from 2:1 to 2.5:1).  And it’s not a financial thing either: between fall 2010 and fall 2014, real expenditures at Swedish universities increased by 12%, or so.

So what’s going on?  Well, a few things, but mainly it seems to be that universities prefer to get more dollars per student than actually increasing access.  And I mean, who can blame them?  We’d all like to get paid more.  But I genuinely cannot imagine any jurisdiction in North America – you know, big, bad North America, with its awful access-crushing neo-liberal tuition regimes – where reducing spaces while government expenditures were increasing wouldn’t be considered an absolute scandal.  Yet this is what is happening in Sweden, and apparently everyone’s OK with it.

Total reliance on government funding can make universities complacent about access.  Fees can incentivize institutions to actually admit more students.  Fees have a role to play in access policy.  The data from Scandinavia says so.

January 20

The Inter-Generational Equity Thing

I see that one of my favourite student groups, the Ontario Undergraduate Student Association (OUSA), has come out in favour of a tuition freeze.  Fair enough; not many students endorse fee increases, after all.  But the stated rationale for wanting one is a bit disappointing – mixing, as it does, poor historical analysis with poor generational politics.

Here’s their thinking:

In 1980, student contributions to university operating budgets in Ontario, which include tuition and fees, were only 18 per cent. In 2014, accounting for inflation, that number reached 51 per cent. I’m no financial planner, but I do believe that if I invest 33 per cent more into something—I should probably receive a comparable amount in return, or at the very least, expect to.

So let me ask: are there more jobs available for university graduates? More co-op and paid internship opportunities? Are students being taught to articulate their soft skills to employers? Has the ratio of students to faculty in the classroom improved? Most importantly, are university degrees more valuable now than they were in 1980? If the answer to these questions, particularly the last one, is no, then why are students paying more than ever for a university education?

(You can read the complete document here.)

There are a number of errors here.  Are there more jobs for graduates?  Yes, of course there are.  Maybe not relative to the number of graduates, but even so, graduate unemployment rates are a lot lower than they were in the early 80s and early 90s (though of course that has more to do with the state of the economy than anything else).  More co-ops and paid internships?  Incomparably more.  In 1980, Waterloo was still about the only place doing co-op; today, the practice is widely spread (and at Waterloo itself, the number of co-op students per year is at least three times what it was back then). The only piece that’s unambiguously true here is the bit about student-teacher ratios.

If we really want to understand why students are paying more for their education we need look no further than the facts that: a) enrolments tripled, and b) the cost per-student for education got more expensive (not always for good reasons, but true nonetheless).  Governments paid for part of this – admittedly less so in Ontario than elsewhere in the country – and students paid for the rest.

And this is why we have to be careful when making comparisons over time.  Of course, we could bring student contributions back down to 18% of total costs: but remember, part of what that increased contribution bought was vastly increased access.  Anyone want to make that trade and return to a time of cheaper education for a luckier few?  No, thought not.

So that’s the analytical error.  The political error – and it’s a seductive one, I’ll admit – is to claim that every time a new generation doesn’t get something that the old generation got, it’s “unfair” and a basis to lay a claim on state resources.  But this way madness lies.  Where PSE is concerned, it’s tantamount to saying “our parents were oversubsidized and we demand the same treatment”.  Or maybe, “we’re getting a pretty good deal on PSE, but we demand that our deals be ludicrously good like they were in the 70s”.

For a whole bunch of very long-term demographic and economic reasons, today’s students are going to find it harder than the boomers, and even the Gen Xers did (also harder than the generation that passed through university between 2000 and 2005, who did pretty well).  There’s not a whole lot anyone can do about that: some cohorts just have it easier than others, and progress isn’t always linear.  Policy shouldn’t be totally insensitive to these shifts, but neither should our goal be to preserve certain benefits in amber just because “that’s what our parents got”.

None of this is to say there aren’t decent arguments in favour of tuition freezes, or even that the “universities need to show value for money” argument is wrong.  (If it were me arguing the case, I’d push for limiting increases in student fees to whatever the increase in public funding is.)  But arguing on the basis of changes that have occurred over 35 years is a mistake; too much of the money spent over that period did too much good to be criticized.  Inter-generational arguments are trickier than they look, both analytically and politically.

January 18

Would Lower Tuition or Lower Student Debt Improve the Economy?

Short answer: not really, no.  But judging by this Chronicle Herald article last week entitled “Eliminating Tuition Fees would Buoy Bluenose Economy“, bad ideas die hard.  So let’s think this one through.

As I wrote back here, there are basically four ways to lower tuition or reduce student debt.  Government can raise taxes to pay for it, borrow to pay for it, re-allocate spending to pay for it, or reduce the cost of educational provision (i.e., cut spending on equipment and salaries).  If you choose the taxing, re-allocating, or cost-reduction methods, the net effect on the economy as a whole is zero.  Yes, students gain, but others lose, so it more or less nets out (exception: taking money from profs with a high propensity to save and giving it to students with a high propensity to spend actually probably would make a bit of a difference in the short-term, but since no one’s actually proposing that we’ll leave it aside).  Only by borrowing to reduce tuition/debt could government actually achieve the goal of a short-term boost; but then again, deficit spending on anything gives the economy a short-term boost.  What’s the case for spending it on students?

(A colleague has since pointed out to me that in theory there is a fifth option: the government could expand the money supply by printing money and using it to buy down student debt.  But that’s: a) not an option open to a provincial government; and, b) really unlikely to be used by a federal government, so I think we can confidently give this one a miss.)

There is certainly a case in Nova Scotia at least for spending some money on controlling student debt.  This is not a province that spends a whole lot on student aid – as we at HESA noted in our work on net prices, entitled The Many Prices of Knowledge.  Nova Scotia is for most students, by most measures, one of the most expensive places to study, so there’s not much doubt that some targeted assistance is in order. But free university tuition for everyone is obviously regressive, so making a case for that option is much harder.

The article doesn’t address the issue of regressivity but it does make quite a different case, which is that a province in as bad a demographic and economic situation as Nova Scotia needs to toss a bone to its youth.  And for what it’s worth, that’s true: the situation for youth in Nova Scotia is pretty dire, and out-migration is a serious issue.  But if that’s the problem you’re trying to combat, why give the biggest subsidies to that section of youth who: a) mostly come from better-off families; and, b) are likeliest to be making high salaries in the future?  Why direct money to them and not youth who haven’t accessed PSE?

If Nova Scotia really wants to do something big and bold, something that will attract or retain youth, and isn’t quite as brutally regressive, it should think about creating a type of tax rebate for all youth – say a 50% reduction on provincial taxes for anyone born within the last thirty years.  That’s a heck of a message to send to young workers – and one that might resonate outside the province as well.  And yes, okay, it’s still regressive, but likely less so than free tuition because at least it includes some benefits to those who don’t attend PSE.

Worth a thought, anyway.

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