The details of the Canada Apprentice Loan, announced in last year’s federal budget, are now public. It’s a straight $4000 that any apprentice can get, once per technical training period for up to five technical training periods for a total of $20,000 per apprentice. And as we predicted in our 2014 Budget Commentary, the loan is in fact going to be completely means-test free. An apprentice could be making $18/hour all year, plus about $1800/month on EI for the duration of the training period – that is, about $35,000 per year – and the government is still prepared to hand you a $20,000 loan, interest free for the duration of the apprenticeship, repayable on the same basis as an ordinary student loan. Because skilled trades.
At this point you’re probably asking yourself: why give loans to apprentices earning $35,000/year but deny them to community college students earning $15,000/year (which is more or less where loan eligibility runs out) via part-time jobs? If a learner’s income or current standard of living is no longer a barrier to receiving financial assistance, why not make student aid universal, the way it is in Australia or the UK or Sweden? Why not just open student loans up to anyone?
Student leaders will hesitate before taking up the cudgels on this one, since many are pretty heavily invested in the “loans = Satan” narrative. But on the other hand, eliminating the means-test will certainly benefit at least some of their members. So it seems likely that at some point this will become one of their demands.
Given that it’s an election year, this might come about fairly quickly. Easier loan terms could be on any party’s manifesto. My personal bet is the Liberals will pick this one up first because they seem to find it so hard to resist gimmicky education platforms that benefit the upper middle-class, but there’s no ideological bar for any party to take up this idea. And precisely because you could see almost any party picking up this idea, it’s a dead certainty that at some point one of them will. It’s inevitable. And once that happens, big changes will be afoot.
The problem is that the costs associated with a move like this could be high. Alberta moved to eliminate parental contributions a couple of years ago and their loan portfolio has increased by something on the order of 50%. That’s OK in an essentially loans-only system like Alberta’s, but try that in a system with more substantial grant or remission amounts and money starts going out the door pretty fast. Most provinces wouldn’t be able to match that kind of generosity, and we could see student loans become yet more complicated with different federal and provincial need assessment mechanisms in each province. Even the feds might find it too rich eventually, and the worry would be that other programs for the needy would be cut in order to maintain this upper middle-class benefit.
There is a way to square this circle, however. And that is to apply a very simple principle: if a loan is universal, it should not come with interest subsidies. Subsidized loans to poorer students? No problem. But subsidized loans to all comers? That way madness lies.
If that simple principle is adopted, we could still preserve a decent system: means-tested subsidized loans for those who need them, and universal non-subsidized loans for those who want (but probably don’t need) them. That way, we would solve the problem of how to help the occasional student whose parents have high income (and hence disqualify a student from receiving student loans) but who won’t contribute to their kids’ education.
It’s probably not the best way to spend new aid dollars – you would probably get more bang for your buck spending that money on aid to First Nations students, for instance. But it’s also not a terrible idea, provided that the loans are unsubsidized.