HESA

Higher Education Strategy Associates

Category Archives: Tuition

June 01

Early Results from the Tennessee “Free Tuition” Experiment

You may remember a blog I wrote last year concerning something called the Tennessee Promise.  Described by some as a “free tuition” program, essentially what it did was ensure that every Tennessee student enrolled in a Tennessee community college received student aid at least equal to tuition.  In the fall, the state touted that first year, direct-from high-school enrollments in Tennessee colleges had increased by fourteen percent.  But now, however, some more complete data is available in the form of the State’s annual higher education factbook, which allows us to look a little bit more deeply at what happened.

What the numbers show is something a little bit weird.  If we look just at direct from-public-high-school -to-community-college/college of technology, the numbers are actually much better than initially advertised.  In 2014, this number was 13,527; in 2015 it was 17,550, and increase of nearly 30%.  That’s quite astonishing.

However, not all of this jump in enrollment at colleges came from “new” students.  To a considerable degree, the jump in the number of community-college bound students came from cannibalizing students who would otherwise have attended 4-year colleges, as shown in the figure below.

Figure 1: Public In-State Public High School Graduate Enrolment by System, Fall 2011-Fall 2015

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So, Community College and College of Applied Technology enrollment rose by about 4,000, but enrollments in 4-year colleges fell by 2,000, meaning effectively that half the growth came from people switching from other types of higher education. Still, net growth in enrollments at all levels was about 2,000 , or 6.8%, which is pretty impressive given that growth in the three previous years combined was only about 4%.  It sure seems like there is something positive going on here.  But what?

Well, free tuition promoters would have you believe that what’s happening here is a rush of previously-excluded poor students suddenly attending because education is more affordable.  Unfortunately, we can’t directly check students’ socio-economic backgrounds, so we can’t know for sure who’s responding to these lower net prices.  However, because the factbook shows transition rate by county, we can look at different enrollment responses by county median household income. Figure 2 plots the percentage increase in enrollments in each of Tennessee’s 95 counties against their median household incomes

Figure 2: Percentage increase in college-going rate, Tennessee 2015 over 2014 by County, vs County Median Household Income

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Pretty clearly, there’s no relationship here, which at face value suggests that participation rates of students from poor counties did not increase any faster than the rates of students from richer counties.  But that’s not quite right.  Remember we are looking at percentage increases, and poorer counties tend to have lower participation rates.  Therefore, in order for the percentage increase to be the same in richer and poorer counties, the percentage point increase actually has to be larger in richer counties.  (think about:  a 10% rise for a county with 30% participation rates is 3 percentage point; for a county with a 60% part rate, a 10% rise requires a jump of 6 percentage points).

So, a pure, unsophisticated simple-stupid pre-post analysis of the Tennessee data, suggests that the Tennessee Promise appears to have i) caused a 30% increase in 2-year college-going rates among high school graduates, half of which was diverted from other types of higher education and ii) caused a 6.8% overall increase in transitions to all forms of college, but that this increase did not primarily take place due to increases of the college-going rate of students from poorer counties.

Make no mistake, this is still a very good outcome for a program that only costs $14 million per cohort per academic year; it works out to $7,000 per new student added to the post-secondary system, which is pretty cheap.  Nevertheless, it’s worth noting that those benefits don’t seem to necessarily accrue to youth from poorer backgrounds.

 

May 16

The New-Brunswick Step-Function

So there’s a kerfuffle going on in New Brunswick about the government’s new “tuition-free” policy for students from families with under $60K in income which I mentioned in passing a couple of weeks ago.  Basically, the problem is that the government drew up the program hurriedly, on the back of an envelope, and didn’t think through the consequences.

If you just listen to the launch announcements, the new New Brunswick program is similar to the new Ontario program (which you may recall I praised to the skies: Ontario promised “free tuition” (actually, grants equal to or greater than average tuition) for “low and middle income families” while New Brunswick promised grants equal to tuition for anyone with family incomes under $60,000.  Same, right?

Wrong.  The difference is that the Ontario program has a long phase-out.  That is, grants fall as income rises, but gradually.  In New Brunswick, they drop off a cliff at $60,000.  A student from a family with income of $59,999 will get (effectively) $7,000 or so in grants, but at $60,001, you’re only going to get about $1,200.  Figure 1 shows eligibility for federal grants (in blue, for 2015-16 and 2016-17), and the New Brunswick Tuition Access Bursary (TAB) and the Ontario Student Grant (OSG) – the OSG line is a bit messy, and I assume it will actually be a bit smoother than this, but this is a best-estimate based on the Ontario budget papers).

Figure 1 – Eligibility for Grants, Ontario Study Grant Vs. New-Brunswick Tuition Access Bursary

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In the business, this is what’s known as a “step-function”, and is generally best avoided because it creates all sorts of weird incentives.  In this case, a New Brunswick family with two parents earning $30,000 each and a kid in university will be way better off rejecting a salary raise than they would be accepting it, as their kid would lose $5800 in grant funding every year. 

But the problem in New Brunswick goes deeper than that.  It’s not just that such parents will lose money in the future, it’s that they are going to be worse off than they are now.  New Brunswick is paying for this move by ditching the provincial tax credits for tuition and education, and this elimination is on top of the federal government ditching its education and textbook tax credits to pay for the upgrade in federal grants.  What this means is that everyone in New Brunswick will lose about $1600 worth of tax credits.  For those at the low-end of the income scale, that’s fine, because this will be offset by the higher grants.  But for a family earning $60,001, they will be losing that $1600, but only gaining $400, thanks to the increase in federal grant.  Something similar happens in Ontario as well, but only once you get past about $110,000 in family income.  In New Brunswick, we’re talking about taking away $1200 per year in aid from people earning $60,000.  That’s a big, nasty hit. 

You may well ask “why didn’t New Brunswick have a more phased-out reduction”?  Well, it’s hard to tell.  The minister, after claiming her program was identical to Ontario’s, later told CBC that she had no idea Ontario had a phase-out and New Brunswick didn’t.  Which is, you know, a bit worrying.  But the bigger reasons are that New Brunswick a) has never spent that much on student aid, and so didn’t have as big a base of money to redistribute as Ontario and b) appears to have only re-invested half the money it saved from axing various tax credits (that’s an estimate – it hasn’t been super-transparent with cost estimates of the program; one wonders if this isn’t the reasons the government didn’t announce this measure as part of the budget where the figures would have been more transparent).  Had it re-invested more fully, New Brunswick probably would have had enough money to do an Ontario-style phase out.

Now, in addition to having announced a flawed policy, the Government of New Brunswick has annoyed the crap out of me personally by claiming that I provided the inspiration for said policy. To that end, it appears to have been handing out partial copies of a paper produced for the previous government in 2011-12.  Since my client has been (selectively) leaking my work, I don’t particularly feel bound by any of the usual confidentiality provisions. So here’s what actually happened:

HESA did do some work for the New Brunswick government – specifically, the Ministry of Advanced Education and Labour – in the fall of 2011.  We were asked two questions.  One, were the back-end subsidies New Brunswick was then using (a timely-completion loan remission program, the usual tuition & education tax credits and a graduate tax benefit) effective?  Two, could we come up with some more interesting ways to use that money? 

To the first question, we answered no, for a variety of reasons which, if you’re a regular reader, you can probably guess.  To the second question we said the money should be used three ways.  One, a new grant program to deal with “unmet need” (that is, need in excess of current aid maximums), which primarily would have benefitted students with dependents.  Second, because student debt and repayment is a much more serious problem in the Maritimes than it is in the rest of the country (because of higher debt & lower graduate incomes), we suggested a hard debt-ceiling of $7,000 per year, with the remainder turned into grants.  Last, we suggested some investment in early-intervention programs.  We did NOT suggest anything like what the provincial government has done.  And frankly I’m more than a bit teed off the present government chose to publicly present our findings that way.

Bottom line: getting rid of tax credits is good.  Re-investing funds in a way that concentrates more spending on lower-income students is good.  Bravo to New Brunswick to getting those two things right.  But details matter.  This government got the details wrong by not fully re-investing and putting too high a burden on middle-income students.  It needs to fix this.

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.  

April 29

Free Harvard Fair Harvard

Harvard has a unique Governance structure.  Basically, it has two boards and no Senate.  One of the two boards – the Board of Overseers – is composed entirely of Harvard alumni.  It has thirty members and the membership turns over a bit each year with annual elections.  This year’s annual election is a bit of a doozy.

Back in January, an alumni and businessman by the name of Ron Unz submitted a slate of candidates – which included consumer activist and former Green Party presidential candidate Ralph Nader – on a “Free Harvard/Fair Harvard” platform.  His double-barreled manifesto, as its name implies, is to get Harvard first use some of its vast endowment to reduce tuition and second to move to a system of race-blind admissions.

What should we make of this?

Well, the first demand is ludicrous.  75% of Harvard graduates end up with no debt, either because they come from wealth and can afford the fees or have income sufficiently low that they received something close to a full ride (technically, Harvard doesn’t give a full-ride in the sense that a student will be expected to work a few hours a week no matter what, but it’s awfully close).   In practice, for a family of 3 with no assets outside of housing and retirement funds, income needs to be about $150,000/year before the aid package drops below the level of tuition (you can play with Harvard’s net price calculator here.  Pretty clearly then, making Harvard “free” genuinely would only benefit those with very high family income.  And frankly why would anyone want to do that?

The second demand is trickier.  The slate is making quite a bit of hay out of data that Asian-American students are being discriminated against in the application process.  Unz himself wrote quite a fierce piece on this in 2012, which suggested that as far as Ivy League admissions are concerned, Asians are the “new Jews” – a reference to the fact that Ivies imposed much higher entrance requirements on Jews than gentiles prior to WWII so that the former did not swamp the latter and drive away all those nice WASPs to whom the Ivies were in fact beholden for fund raising (this story is told in excellent detail in Jerome Karabel’s The Chosen, which is a history of admissions and the concept of merit at Ivy League schools).  Unz in effect argues – and it is difficult to disagree with him, based on the evidence – that increasingly the group that is “paying” for affirmative action (that is, policies which give Black and Hispanic students preferential access to spots at Ivy League schools) is Asian-Americans, not whites.

There’s no doubt that Unz’s narrative is troubling (though it should be noted not all his claims appear to be factually correct).  That said, his solution here is effectively to end affirmative action.  Given the extent to which Harvard graduates dominate public life in the United States, ending affirmative action would have an enormous effect on the ability of Blacks and Hispanics to access some of the upper corridors of American society.  Add that to the fact that Unz has in the past funded groups with some fairly unpleasant white supremacist associations, as well as sponsoring ballot initiatives against bilingual education, and you can see why some people think that behind Unz’ pre-occupation with fairness for Asian-Americans lie some much nastier anti-Black and anti-Hispanic prejudices.

The presence of the Unz slate has prompted the formation of an opposing “Coalition for a Diverse Harvard” slate, which is vigorously defending the current admissions system.   The balloting is by mail, and results will be announced on May 26th.  The results will be closely watched, particularly in a Presidential election year.  If Harvard’s own alumni – a group which you’d think would be in the tank for the Democrats – votes against affirmative action and for spending more endowment money on the richest of the rich, it will cause some interesting ripples in the campaign.  For that reason, I think it’s quite unlikely to come about, but then again I wouldn’t have guessed Ralph Nader would ally himself with this set of ideas, either.

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 30

Why the US Free Tuition Debate is Different

Free tuition is a growing political issue in the United States.  Most of the free tuition plans out there (for instance in Tennessee and Oregon) are effectively variations of what was recently introduced in Ontario – that is, a re-packaging of student aid so that some students pay “net zero” in college – or at least community colleges.  The plan President Obama has presented to Congress over the past twelve months or so seems to be a bit more expansive – that is, actual zero-tuition for two years of community colleges rather than just a re-jigging of aid (personally, I don’t think the math adds up on the proposal but that’s as may be).  But it’s still just for public community colleges, which make up around a third of the system as a whole.

A more expansive set of proposals comes from the work of the University of Wisconsin’s Sara Goldrick-Rab and Nancy Kendall, who have produced an even more expansive proposal, which includes two years of free tuition (that is, no up front fees to anyone, not a simple re-jigging of aid to achieve “net zero”) at all public institutions – including 4-year universities – plus substantial financial aid for all.

(I am going to skip Bernie Sanders’ even more expansive plan for four years of free tuition at public universities.  That’s partly because I’ll be getting into that later this week when I look at the various presidential candidates’ higher education plans, but also because the Sanders plan isn’t costed in a serious way.  Basically, it involves raising revenue by imposing a Tobin tax on financial transactions and states suddenly agreeing to do spend a lot more on higher education, neither of which has a snowball’s chance in hell of happening. So I’m skipping it here to focus on the programs which are actually likely to be a part of public policy over the next couple of years.)

What’s worth noting about all these plans is that they all share one thing in common: they all restrict their ambitions to public institutions.  They all assume that private higher education, whether for-profit or non-profit, will go on regardless.  In international terms, that would result in a system that looks a lot like Hungary’s or Romania’s: a mostly-free public sector and a full-cost private sector.

This assumption insulates US free-tuition types from one of the arguments made by pro-tuition types (like me) – namely that free-tuition gives away too much to the rich.  In the US, the free-tuition types can dismiss that argument by saying – with some justification – that the rich don’t go to public institutions (two-year colleges anyway) because they prefer to seclude themselves in private ones.  That being the case, very little of the new subsidy would reach the top quartile, who are the prime beneficiaries of free tuition in countries where education is all or mainly in the public sector.

In fact, if you look at the Goldrick-Rab/Kendall proposal, it’s quite the opposite: the rich in the private institutions pay quite a bit.  Her proposal takes away $18 billion in need- or income-based financial aid from students at private not-for-profit universities – it also redirects effectively all existing grants and tax expenditures at both publics and privates as well (the assumption here is that institutions will re-deploy their own aid away from 1st and 2nd years to help upper-year students so that they don’t lose out, but it seems clear that to some degree students in later years might be more loan-dependent than they currently are).

Now, that said, this proposal is not as clearly pro-poor as some of the state policies.  By including all publics (including the big flagships), it provides money to a lot of people, many of whom are not what you would traditionally call needy.  Making attendance cheaper at prestigious public institutions while increasing net costs at privates may also significantly change enrolment patterns.  Almost certainly it will mean fewer low-income students at private universities (which may or may not be a good thing, depending on your point of view); it also probably means some upper-middle class kids will make the switch back to public universities which would to some extent dilute the progressiveness of this measure.  Goldrick-Rab and Kendall would almost certainly respond that in the US, only universality will get the middle-class to buy-into a program that would help the poorest; of course, in Canada, we’ve just had two big re-arrangements of student financial aid (in Ontario and federally) which show that our politics are quite the opposite.

The important points here are: i) free community college plans are cheap because they’re near “net free” already; and, ii) a free first-two years plan is at least fiscally conceivable if you completely defund the private system (which may or may not be politically feasible).  The former of these is pretty much true in Canada as well.  The latter is quite different and depends on a very different set of institutional factors that those at play up here.  Don’t assume that the arguments which make sense south of the border also make sense up here.

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 21

An Orgy of Bad Policy in Saskatchewan

Two weeks from today, voters in Saskatchewan go to the polls.  You may be forgiven for not having noticed this one coming since it has barely registered in the national press.  And that’s not just because of the usual central Canadian obliviousness, or because it’s a fly-over province; it’s also because this is one of the least competitive match-ups since…. well, since the last time Brad Wall won re-election.  CBC’s poll currently gives the Saskatchewan Party a 25 point lead over the New Democrats.

Normally, when provinces go to the polls I do a detailed look at their post-secondary platforms.  It hardly seems worth it here.  Neither the Liberals nor the Greens have a chance of taking a seat so frankly, who cares?  The NDP has released a platform full of promises large and small (my particular favourite: on page 34, they pledge to put more refrigerators in public liquor stores in order to provide more cold beer options), but did not even bother to put out a costing document, which suggests not even they think they have a hope in hell of winning on April 4.  For their part, the Saskatchewan Party has put out a manifesto, which basically says “elect us and the good times will continue to roll”: no strong vision of the future, just a recounting of past glories and four small promises that add up to a total of $110M over four years.  The only manifesto I can think of that comes close to this in sheer complacency is the Liberal Red Book from the 2000 federal election.  Which, given that oil is still around $40/barrel, is quite something.

But hey, when you’re writing a daily blog, sometimes you need an easy target. So here goes:

The Saskatchewan NDP platform on PSE is pretty awful.  They want to “improve funding for post-secondary institutions” (By how much?  Who knows?  There’s no costing document).  They want to offer everyone a $1,000 rebate on tuition, which everyone knows is regressive.  They also want to convert all provincial loans, but this actually isn’t much money since Saskatchewan aid is mostly grant.  But, get this: they also want to get rid of interest on outstanding provincial loans, which is just a whole mountain of dumb since it has no effect whatever on access, and rewards people for choices they made years ago.  Offering to help borrowers in distress is sensible; a blanket interest subsidy for people who have already finished their studies implies the manifesto-writer has suffered some kind of head trauma.

Still, in some ways, the NDP platform looks good in comparison to what the Saskatchewan Party is offering.  As some of you probably know, for the past decade or so the Government of Saskatchewan has offered a generous set of tax credits to graduates who stay within the province.  Essentially, if you are a university graduate you can reduce your payable provincial taxes by $2,000/year for the first four years that you live in the province, and $4,000 per year for the next three (if you don’t earn enough in a given year to use all of that, you can carry forward to a future year; amounts are reduced slightly for college graduates).  Add to this the usual panoply of federal and provincial tax credits, and you realize that Saskatchewan graduates who stay in the province are receiving more in tax benefits than they ever pay in tuition.

If that formulation sounds familiar, it should – it’s exactly the way Ontario finally figured out it could market itself as having “free tuition” to low-income students without spending a penny.  But the Saskatchewan Party, instead of following Ontario and transferring money to a more front-ended set of incentives, has decided to double-down on the back-end.  Their big post-secondary-related pledge is to allow graduates to take up to $10,000 unused rebate money and use it as a down payment on the purchase of a house.

Yes, I am serious.  Check it out.  Page 8.

I mean, in a way, it’s genius; a twofer tax credit, combining the middle-class’ two fondest wishes: that government subsidize both their education and their house purchases.  And if you assume the basic premise that graduates need financial inducements to stay in the province, why not make that financial inducement in the form of a housing subsidy, which physically ties graduates to the province?

But in another, deeper, way it’s a travesty.  If the Saskatchewan Party has done such a fantastic job managing the economy, why does the province still need this financial inducement to get people to stay in the province?  If the argument is that “young people need a break”, why give so much to those likeliest to succeed (i.e. university grads) and nothing to those least likely (those who never make it to PSE)?

So, yeah, Saskatchewan.  Yet another province with a bi-partisan consensus that all the specified PSE goodies should go to students and graduates rather than, you know, the actual institutions who provide the education.  Raspberries all around.

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 15

ECE Contributions vs. PSE Contributions

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

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

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

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

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

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

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

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

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

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

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

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

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

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Fun, huh?

Tomorrow: the policy implications.

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