There’s a new policy fashion in student aid and it’s called “debt-free PSE” (or debt-free college, depending on which side of the border you reside).  But what does it mean?

Some might think of debt-free PSE as being similar to tuition-free PSE, but in fact they are quite different in practice for two reasons.  The first difference is that under debt-free PSE, the level of tuition can be anything you please: the only thing that is constant is that all aid is provided in the form of a grant rather than a loan.  The second is that while tuition-free policies leave open the question of how living expenses are to be covered, a debt-free policy states that they will not be covered by loans.  In effect, debt-free policies are both more generous (to low-income students who need aid to cover both tuition and living expenses) and less generous (to richer students who do not need aid) than free-tuition policies.

So, great, right?  What’s not to like?  Well, in theory, not much.  In practice…well, it’s trickier that it looks.

Here’s the basic problem: the simplest way to get to a debt-free PSE policy is just not to provide aid in the first place.  There are a number of countries that have these kind of policies: Greece, for instance, has no need-based assistance at all.  Graduates have no debt, but loads of students can’t get the money they need to keep body and soul together in the first place.   And the problem is that once governments commit to paying for every marginal dollar of aid in the form of grants, they will start finding reasons to restrict access to extra aid a lot faster than if they are providing it in the form of loans (which, at current rates of interest and loan loss, cost the treasury about a quarter for every dollar loaned).   In other words, in the short term, debt-free policies are progressive (and expensive); in the medium-term possibly less so.

I would argue that uncertainty about the generosity of aid programs in a debt-free world are a major reason why proposals to make college debt-free are so often half-baked.  Let’s take two current examples: one in the United States and one in Ontario.

In the US, the proposal comes from Democrat Brian Schaatz, who has introduced something called The Debt-Free College Act into the House of Representatives.  Perhaps the details need not concern us too much, given Republican control of Congress and the White House; essentially it mirrors the Clinton free-tuition plan in that the federal government intends to pay states to pay their state universities to do things (in this case, get students to graduate debt-free rather than charge zero tuition), all at a cost of $95 Billion or so, which is roughly twice what the Clinton free tuition-plan cost.  Expensive, yes, but Democrats have basically stopped bothering caring about cost since the Republican tax bill and budget killed their ability to debt-shame anyone.

In Ontario, it’s the New Democratic Party which has – sort of – come out with a debt-free PSE plan in its recently-released manifesto.  It’s certainly a more progressive proposal than the usual tuition-freeze or tuition-free platform, though they remain addicted to absurd talking points about fees (“Skyrocketing costs are making post-secondary education and training out of reach for too many Ontarians”, which makes it tough to explain why the province has the highest PSE participation rate in the country) and debt (“those who are able to enroll are often facing student debt the size of a mortgage” – in what freaking province is $29,000 a mortgage?).

What the NDP have promised, though is a bit vague.  The statement is: “New Democrats believe every young person should have a debt-free start. Achieving this will require a major rethink and overhaul of tuition, grants, loans, job opportunities and experience, and how we fund Ontario’s postsecondary institutions. We are committed to a debt-free start for every Ontarian.”  That phrasing suggests that the party has no fixed idea about how to achieve this goal.  But it is worth noting that well over 80% of the (public) student debt acquired by Ontario students is federal debt – the provincial program is already mostly grant – which suggests the only real way to achieve “debt-free” is for Ontario to pull out of the Canada Student Loans Program and set up its own program.

In the absence of a costing document and some more details, it’s hard to say what this commitment means or to evaluate it properly – but for the moment, let’s all applaud the NDP for picking a policy which is genuinely progressive (if perhaps unnecessarily generous) rather than simply reaching for the tired and awful free-tuition solution.