HESA

Higher Education Strategy Associates

Category Archives: Tuition

September 24

Education is a Right… So?

I dig those little buttons you see sometimes.  The ones CFS hands out saying, “Education is a Right!”  What I don’t get, though, is why anyone thinks that kind of a slogan actually means anything with respect to education funding.

You’ve probably been in this discussion once or twice in your life.  Chatting about tuition, or funding, or whatever, and someone takes the position that there should be no fees/greater funding/etc.  You debate the merits of the point for a while and then that person – often with a tone of smug moral superiority – lays down the trump card: Education is a RIGHT!  And then dares you contradict him/her.  After all, you’d have to be some sort of monster to constrain a right, wouldn’t you?

Of course, this is horsepucky.  Education is not the only economic and social right which has been enumerated by international convention; how would those other “rights” look if we presumed that: if “X is a right” then “X must be provided free of charge”?

1)   Housing.  Shelter is of course a right under the Universal Declaration of Human Rights (article 27, for you treaty nerds). Now maybe I’m not paying close enough attention, but I don’t see anyone arguing that housing should be provided free of charge by the state just because it’s in the UDHR.  It’s been done of course – many communist countries went down this route – but one of the results is that housing providers tend to want to make provision more uniform.  And of low quality.

2)   Food. Even North Korea doesn’t make food free.  Subsidized, yes; free, no.  That’s because even the most hardline communists recognize that different people have different tastes, and have the right to use the fruits of their labours to construct their own consumption baskets.

3)   Health.  Most countries buy some of their health-care collectively though some sort of insurance function, which makes it free in the sense that the zero-tuition crowd would like education to be.  But not even Canada pays for all its health care this way – between eyes, teeth, drugs, elder care, and sports medicine, private expenditures still make up 30% of all health care dollars in Canada.   The difference of course is that this is insurance – protection against random catastrophic loss.  Education doesn’t work in quite the same way.  One rarely hears of young people being randomly and catastrophically educated.

In short, the “rights” argument is the start of a conversation, rather than the end of it.  In no other social and economic fields does the fact that something is a “right” make it automatically free to all.  Rather, it means that it needs to be available to all, and selectively subsidized where necessary.  In other words, the status quo.

September 17

Why Public Higher Education Should be Free…

… is the unfortunate title of a new book by Robert Samuels, a professor at the University of California, and president of the University Council – American Federation of Teachers.  The title is unfortunate because the book’s not really about free tuition; the subject doesn’t really get a look-in until about three-quarters of the way through.  Rather, Samuels’ book is mostly about (as he puts it in the title of his first chapter) why tuition goes up and quality goes down.  When Samuels focuses on this issue, it’s an excellent book.  When he strays, it’s not.

Let’s start with the good stuff.  Chapter 2, “Where the Money Goes in Research Universities,” is genius.  Not because it’s saying much that people don’t already know – pack in the undergrads, teach them using underpaid sessionals, reserve “real” profs for graduate students and research – but because it’s very rare anyone on the inside of universities exposes this strategy in stark naked terms (ok, yes, Ian Clark and co. have also done it, but Skolnik aside they aren’t academic lifers). I mean, sure, people like me talk about it all the time, but within institutions themselves there’s an omertà about it all.  Samuels is a rare bird in stating that while reductions in government support haven’t been helpful, a lot of higher education’s wounds on the undergraduate front are self-inflicted.

Where he’s less good, frankly, is on actual issues of money.  The chapter on university endowments – which focuses entirely on bad risk management practices leading up to 2008, without bothering to consider university long-term investment practices, or the recovery of endowment positions since 2008 – is either inept or mendacious, I can’t tell which.  And Samuels makes no serious attempt to prove his claim that, with just a few revisions of mission, tuition could be made free.  It’s not that he doesn’t have good ideas for making institutions less costly, it’s that the extent of possible savings is not quantified, and he can’t seem to decide if such savings should go to improving the plight of sessionals by making them full-time, or passing the savings on to students.  It’s a a lot of hand-waving, frankly.

As for the touted benefits of free tuition?  Basically, it’s that poorer students would be better off if it were so.  This is true, but could just as easily be achieved with grants.  Why governments and institutions should provide windfall gains to millions of students from better-off families in order to make it free for poorer ones isn’t addressed.

So, briefly: 9 out 10 for the first three chapters because it’s an unusually clear and concise statement of the problems and of the current political economy of universities.  After that, it’s about a 5 out of 10.

September 06

Grants and Net Prices

Yesterday, we saw how tax credits lowered net prices by refunding students (or their families) roughly one out of every three dollars spent on tuition.  But that’s not the whole story, because there are a lot of university students who also get some form of non-repayable assistance (i.e. grants); for them, tuition is even lower.

Let’s start with Quebec, where net tuition after tax expenditures is a mere $1,555.  Data from the latest Aide Financiere aux Etudes annual reportadjusted for known changes in student aid expenditures, suggests that somewhere in the neighbourhood of 50-55,000 university students are receiving grants, which, on average, are worth $6,380 apiece.  Meaning that net tuition for grant recipients in Quebec is in fact negative $4,825.

In Ontario, net tuition after tax credits is $5,680.  Everyone with a family income under $160,000 is eligible for the Ontario Tuition Grant, which is (effectively) worth $1,730.  So that means that, in fact, for a considerable majority of the full-time undergraduate population, net tuition last year was is $3,950, which is lower than it’s been at any time since 1998-99.

Figure 1 – Net Real Tuition in Ontario, After Tax Credits and Tuition Rebate, 1995-96 to 2012-3

 

 

 

 

 

 

 

 

 

 

 

 

Here’s where the analysis gets tricky.  In the CSLP zone, many people receive more than one grant, mainly because of the overlap between federal and provincial aid.  But while we know the average size of each grant, there’s no method of working out how many of the 320,000 recipients of federal grants (who receive on average 1.18 federal grants each – you can get more than one) also receive one of the 250-300,000 provincial grants.

However, based on a little bit of policy analysis – and some phoning around to friends in provincial governments – I reckon that between half and 2/3 of all provincial grant recipients are getting federal aid, as well.  That would give us a ballpark of about around 430,000 total grant recipients, of which roughly two-thirds are in universities.  With roughly $1.2 billion being given out in the CSLP provinces, that suggests that the average grant recipient there receives about $2,800.

Taking that data and merging in the Quebec numbers gives us the picture we see in Figure 2: 

Figure 2 – Actual Net Costs, Canada, 2012-3

 

 

 

 

 

 

 

 

 

 

 

 

Across Canada, the sticker price of tuition and fees last year was $6,331.  As we saw yesterday, that falls to just over $4,300 when you take tax credits into account.  And that’s the real net cost for about two-thirds of the full-time student body.  But for the other third, the third that gets grants, real net tuition averages just over $1,000 – and it would appear that for a substantial proportion of these students, the actual cost is negative.

So, when the Statscan tuition numbers come out, just remember: no one actually pays the amounts Statscan reports.  Most students pay about 66% of the sticker price, and the neediest third (proportions may vary by province) pay about 17% of the sticker price.

September 05

Affordability

At some point in the next week or so, Statistics Canada will be releasing its annual statistics on tuition fees.  Hopefully it will be less of a fiasco than last year, when they released data a few days after the Quebec election, but didn’t bother to note that the planned tuition fee hike was being reversed.

What I want to do today is to put the inevitable “rising fees” stories that always accompany the Statscan release into some sort of context.  Students pay two types of fees – tuition and “ancillary fees”.  Statscan data on the latter is only marginally better than hopeless, so these fluctuating annual figures need to be treated with extreme caution; but they’re a non-negligible part of total tuition (15% or so), and so I include both in the graph below showing the evolution of total fees.

Figure 1 – Average Tuition, Canada, Nominal Dollars

 

 

 

 

 

 

 

 

 

 

 

 

Figure 1 is the graph that the zero-tuition crowd love to show: steady 5.1% annual tuition increases from 1995 to the present.  That’s actually a trick of scale – in fact, during the era of maximum government skintness (the 90s) tuition was going up about 9% per year to make up for cuts in government grants.  After 1999, the economy improved, public finances improved, and the rate of fee increase fell to just about 4%.

There is, however, a little thing called inflation.  It’s kind of important if you want to understand real prices over time.  Here’s what the tuition graph looks like if you take inflation into account.

Figure 2 – Average Nominal and Real ($2103) Tuition, Canada

 

 

 

 

 

 

 

 

 

 

 

 

This changes things a bit.  Those annual increases since 1999-2000?  Just two percent, after inflation.

But, as apparently nobody in the press or politics seems to understand, those increases in fees have been accompanied by increases in subsidies, too.  The most important of these are the increases of various forms of tax credits.  Say what you want about them – they reduce the actual cost of education by about a third.  Their value is eroding slightly at the moment due to inflation, but they are still worth $2,220 to the average Canadian student.

Figure 3 – Average Nominal and Real ($2013) Tuition plus Net Real Tuition Canada

 

 

 

 

 

 

 

 

 

 

 

 

Finally, if we’re looking at affordability, we also need to take into consideration a measure of ability-to-pay, because cost on its own is meaningless.  Televisions cost more than they did, say, 40 years ago, but no one thinks they’re “less affordable”, because incomes have risen even more quickly.  So to compare affordability across time, what we need to do is look at cost over time with respect to a measure of purchasing power, such as average family after-tax income.  Which I do, below.

Figure 4 – Real Net Tuition as a Percentage of Average After-Tax Family Income

 

 

 

 

 

 

 

 

 

 

 

 

So, is tuition less affordable than it was?  Well, a bit, yes.  Fifteen years ago, it took up 4.8% of average, after-tax income; now, it takes up 5.2%.  But calling it a crisis, the way the usual suspects routinely do, is a bit of a stretch.

And we haven’t even taken into account need-based student aid yet.  We’ll do that tomorrow.

September 04

The Impact of Tax Credits

One of the many ways that Canada stands out as unusual in its financing of higher education is the degree to which its subsidies to students and families runs not through loans or grants but through tax relief.  Well over $2 billion/year goes out to students that way; for full-time university students in Canada last year, tax credits on average amounted to $2,200, or almost a third of the sticker price.

But given how central tax credits are to our system, what’s incredibly puzzling is that no one seems to actually understand how they work.

These are what you call “universal subsidies” – everybody gets them, regardless of need.  Right-wingers should (and often do) like this because it’s a straight voucher-like mechanism.  Left-wingers should (and often do) dislike this because, sans need assessment, they are much more likely to end up in the hands of wealthier families than poorer families.

But while it’s true that, when it comes to tax credits, the political right usually lines-up in favour, and the left usually lines up against, the fact of the matter is that the distributional impact of these grants is absolutely no different from a tuition subsidy or rebate – as the NDP have implemented both in Manitoba and Nova Scotia.  There is not one iota of difference.  And yet, left and right line-up completely differently.  What is brilliant/heresy if done through the tax system becomes a waste of money/the epitome of progressiveness if done through tuition subsidies.

(Shorter version: most partisans are stupid.)

The other objection to tax credits is that, “they don’t deliver aid when students need it”.  And while that’s a cogent critique, I’m not sure it’s as powerful as some people think.  Thirty-five percent of credits get transferred to parents, and I’d guess their need for them come tax time is probably as acute as their need for them in September.  For the 45% which get claimed by students in the year they are issued (most of whom keep the credit because they need it to offset earnings), they actually see the benefit every single time they get a paycheque, via lower tax withholdings.  Pretty useful, no?  It’s really only the 20% that carry the credit forward who might really have a serious complaint, and even they probably find the bigger tax rebates handy for repaying student loans after graduation.

The point here is not that tax credits are ideal; their goofy distributional consequences alone are enough to put them outside the pale.  But they do help reduce costs – a lot.  Tax credits mean that every time tuition goes up by a dollar, governments effectively pay for $.33 of it themselves.  We should pay more attention to them when thinking about the real costs of education.

July 15

More Money Than You Think

If there’s one thing everyone knows, it’s that Canadian universities have had a hard time of it during the recession during the last few years, yes?  Absolutely starved for income because of government cutbacks, etc etc.

Not so fast.  Check out this data on university operating budgets from the CAUBO/StatsCan financial survey:

Figure 1: Indexed growth in University Operating Budgets 2007-08 to 2011-12

That’s right – across the country, university budgets went up by 28% between 2007-08 and 2011-12.  That’s more than twice the rate of inflation.  (Note: if you’re wondering why Alberta skews high, its because MacEwan and MRU were re-classified as universities in 2009 – take them out and Alberta basically looks like BC).

How is this possible, you ask?  Haven’t governments been cutting back?  Well, the last two years haven’t been very good, but let’s not project that too far backwards.  In fact, during the heart of the recession years, the worst any major province fared (Ontario – big surprise) was to keep pace with inflation.  Across the four big provinces which make up 90% of our national system, spending was actually up nearly 20%.

Figure 2: Indexed Growth in Government Contributions to Operating Grants, 2007-08 to 2011-12

Those of you with heads for numbers may now be scratching your heads.  Government grants are a little over half of all institutional income.  So if overall income is up 28%, and this half of it is only up 20%, that means the other half – the student half  must be up by…

 Figure 3: Indexed Growth in Tuition Income, 2007-08 to 2011-12

Yeah, that’s right: tuition income is up 40%.  Four.  Zero.  How is this possible when Statscan says tuition fee increases are only about a third of that?  Because this is aggregate tuition and Statscan looks at average tuition.  One is larger than the other partly because of increases in domestic enrolments, but more importantly because of spectacularly increased international enrolments, which also carry much higher tuition fees.

Obviously, with extra students come extra costs, which is why it doesn’t necessarily feel like there’s 28% more money floating around these days.  Between enrolment increases and cost increases (mostly labour costs, including rise through the ranks (Link to: http://higheredstrategy.com/rise-through-the-ranks-rtr/)), Ontario is still slightly down on the deal in per-student terms, while other provinces are up, but only slightly. 

“Cutbacks” aside, governments are still spending far more than they were on PSE six years ago (even in Alberta) and institutions have been absolutely raking in cash from tuition.  We don’t have the 2012-13 numbers yet, but they’ll likely be in the 8-9% range everywhere except Quebec.  That means operating budgets overall likely expanded by about 3-4% last year, even as governments reduced funding.

Two final thoughts: One, if institutions still feel squeezed when income is rising twice as fast as inflation, it means there are some serious issues to work out on the cost side.  And two, God help us if those international students stop coming.

 

 

July 08

The Size and Purpose of Government

Ever wonder why it seems like higher education is always in a financial trouble?  One big reason can be found in Agatha Christie’s autobiography.  Reflecting on her station in life as a young woman early last century, she noted in her memoirs how she never thought she would ever be wealthy enough to own a car – nor ever so poor that she wouldn’t have servants. 

In today’s world, of course, this makes no sense at all, since almost everyone has a car and almost no one has servants.  But 100 years ago the relative price of labour was such that it made perfect sense.   The lesson here is that over time, labour tends to rise in price relative to machines. 

Continually improving production efficiency is absolutely fabulous when it comes to consumer durables.  It means that cars are  a fraction of their former cost, while being faster, safer, and more reliable.  It means that for a couple of hundred bucks, anyone in the world can have more computing power in their cellphone that existed in the entire world in 1970. 

But the effect in labour-intensive industries is just the opposite: relative to other sectors, prices rise continually.  If everything were purchased privately, this would be no big deal – people would just adjust their budgets to spend the savings they make in one area (durable, machine-produced goods) and spend it on the other (labour-intensive goods). 

But here’s the problem: a few decades ago, society decided that most of the important labour-intensive industries – mainly health and education – needed to be in the public sector.  This limits the ability of individuals to shift consumption from one sector to the other because we constrain the ability of individuals to spend on their own education and health-care.  So the only way large-scale shifting between labour-intensive and capital-intensive goods can happen is through taxation.  For obvious reasons this complicates things.

So here’s the deal. The cost of providing a given standard of health and education will go up and up and up, no matter what anyone does.   We can either pay for that by taxing a heck of a lot more to fund those services (and hey, why not?  With cheaper consumer durables we require fewer post-tax dollars to keep ourselves clothed, sheltered and fed), or we can ask/allow citizens to pay for a greater part of the services they receive, or some mix of the two.  Those are the only choices.  Despite this, what governments across Canada are doing right now is the exact opposite of this.  They are freezing taxes while preventing these services from raising money themselves through new fees.   

As a long-term strategy, this is leading nowhere but failure and mediocrity.  We need to stop pretending we can avoid hard decisions on this.

April 19

A Two-Tier Tuition Regime in Quebec?

Things are getting interesting in Quebec.  First Laval and now l’Université de Montreal are publicly threatening to leave the Conseil des Receteurs et Principaux des Universites du Quebec (CREPUQ).  In the discreet and diplomatic world of Canadian University politics, this is like blowing a vuvuzela during a piano recital.

At one level, this is a delayed reaction to CREPUQ’s limp performance during last year’s tuition fee debate.  At the outset, all institutions agreed to take a common position and speak through CREPUQ, a strategy fatally undermined by CREPUQ’s subsequent decision to spend the crisis hiding under a blanket.  I don’t have any inside information, but reading between the lines, it seems that there was a split between the independent universities (McGill, Concordia, Bishop’s, Laval, Montreal, Sherbrooke) and the UQs, with the former mostly thinking the Charest government didn’t go far enough, and the latter – possibly with an eye on an incoming PQ government – being more ambivalent.  The result was a deafening and damaging silence from the reform’s key beneficiaries.

The lesson Laval and Montreal seem to have taken from this is that CREPUQ and their UQ colleagues are no longer to be trusted.  And so they are now out actively lobbying for a two-tier solution, which would promote their interests over those of the UQ system’s.  Specifically, they are arguing for a two-tier tuition structure which would allow research-intensive institutions to charge a higher fee, while allowing the government to claim it is preserving access by giving students a low-fee option through the UQs.

I think there is some merit in a two-tiered solution.  Clearly, a lot of (mainly francophone) students have made it known that they value cheap universities over good universities.  So, fine, let those be the UQs.  For everyone else, there’s a better-resourced solution, funded by fees rather than government.

But the specific details of the plan are a bit sketchy.  First of all, the link between tuition and research is a bit ridiculous.  What’s the value proposition: “pay us more, so we can pay less attention to you”?  Even if it weren’t ridiculous, the idea that it would apply to just Laval, Montreal, McGill, and Sherbrooke is nuts.  On any research measure other than, “do you have a medical school”, Concordia kicks Sherbrooke’s behind; for it not to be on that list is a transparent piece of linguistic politics and institutional snobbery.

If you’re going down the two-tiered road, it seems to me that there’s a logically solid case for restricting it to just two universities (McGill and Montreal, genuinely world-class and special) or expanding it to six by including all the “independent” universities (i.e. including Concordia and Bishop’s).   Anything else seems arbitrary.

April 18

Students Aren’t Keen on “Disruption”

I don’t think there’s any doubt that the current proliferation of MOOCs is meeting an enormous demand for access to informal learning opportunities.  Millions of people are signing up for courses which interest them, picking a few bits they wish to consume, and, in a few cases, even completing them – all at the low, low, price (to the user) of zero.  Undoubtedly a great development.

But for MOOCs to be sustainable they have to eventually generate some revenue, and things aren’t going so well on that score.  Coursera made a fuss last week about the $220,000 they earned last quarter by issuing certificates of completion; but given that they’re on $22 million of VC money, that’s still pretty anemic.  At the end of the day, someone has to pay for this stuff.  This is why some ed tech types seem to be pinning their hopes on governments changing the rules and, in effect, forcing universities to accept MOOCs and other not-necessarily-accredited courses – as is currently taking place in California and Florida.

There’s an important realization here: quite apart from faculty resistance, there are real regulatory barriers to institutions joining the techno-fetishist higher education revolution.  And therefore, the debate about MOOCs is heading quite quickly from being casual banter within universities, to being an outright political fight.  But on whose side should students fight?

Conceivably, students in places where colleges have been so ravaged by cuts that they are turning away large numbers, might actually be supportive of MOOCs for credit. But what about in Canada, where that’s not the case?  We noted a little while ago that students didn’t seem to be banging down the doors to take MOOCs, but that’s not proof they’d actually oppose it.

We decided to test this proposition by asking our MyCanEd student panel members if they would feel moved to participate in public protests should their province or institution announce a plan requiring students to take half their courses in an online format.  To calibrate the response, we also asked them a question we were pretty sure would elicit a strong response; namely, whether they would protest if their province or university announced a plan to raise tuition by $1000 every year, for five years.  The results were… intriguing.

How Likely Would you be to Participate in a Protest in the Event of:

 

 

 

 

 

 

 

 

 

 

 

The short of it is that forcing students to take courses online is only slightly less unpopular than a $5000 tuition hike.  This is something governments need to consider before they get too excited about the cost-saving potential of MOOCs.  And it should be cold water in the face of anyone who thinks that there’s a demand among current students for this particular form of “disruption”.

April 12

In Praise of Downward Mobility

One much-used trope, among those wanting to bash higher education, attacks the idea of “downward mobility”.  Typically, a journalist finds a kid from a nice middle-class family, having a hard time making-it in the labour market, and uses this as a platform for a string of Wente-isms:  “Higher education is supposed to be about upward mobility – but now graduates are downwardly mobile!  Won’t somebody please think of the children?” Etc. etc.

But upward mobility is greatly overrated.  Downward mobility is where our focus should be.  And here’s why:

Part of the problem with the notion of upward mobility is that, with respect to education, the term gets used in two distinct ways.  The first is a, “rising-tide-lifts-all-boats” interpretation, where everyone is upwardly mobile in the sense that everyone’s purchasing power is rising.  Universities and colleges, through their enriching of human capital, and their contributions to the national innovations system, are seen to be key actors in this process – though, obviously, there are many other things which also go into economic growth.  Right now, this kind of upward mobility is in short supply.

But even where there is little or no economic growth, upward mobility in a second sense – that of people changing their position within the overall social hierarchy – can still exist.  But this type of mobility is a zero-sum game.  Upward mobility can only exist to the extent that downward mobility does.

The book I discussed yesterday, for example (Paying for the Party), is full of stories about downwardly mobile middle-class kids (albeit mostly ones who don’t work very hard at their studies).  That’s sad, but what’s truly appalling is the complete lack of downward mobility among the upper-class students.  No matter how useless they are academically, mom and dad are always there to help them avoid the consequences of their inaction.

A fair society, one where social position is actually reflective of effort and ability, requires more downward mobility, not less.  We need to be finding ways to take inherited privilege away, not re-inforce it.  It’s why the rich need to pay more in tuition (and why the poor need grants to offset it).  It’s why legacy admissions and merit scholarships that don’t take social origins into account need to be fought.  It’s why all those unpaid internships in so-called “desirable” fields (mainly media and publishing) are not just illegal but are also immoral, because they tilt the playing field to the trustafarians who can afford them.

In a low-growth economy, allowing some to rise in social position means others must fall.  We in higher education have a vital role to play in this, and we shouldn’t be squeamish about it.

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