Today, I want to look at Jagmeet Singh’s recent promise that an NDP government would forgive up to $20,000 in federal student debt.  It was a fascinating little announcement, which is part-super-savvy and part deeply-perplexing.

The announcement itself, which you can read in the NDP press release here,  says that an NDP government would i) eliminate interest on student loans because interest = profit, ii) bring in a 5-year waiting period before student loans became repayable and iii) forgive the first $20,000 of federal students debt.  At the press conference, though, Jagmeet Singh kind of buried the lede by talking at length about his vision for “a future in which tuition is free for everyone” despite the fact that formally, the NDP made no pledge whatsoever to do with tuition.  

Sounds super-generous and incredibly expensive, right?  My quick take on this was that, as described, it would probably be close to $3 billion per year, with a one-time hit of anywhere between $8-10 billion.  But – and this is where it gets a bit weird – at the announcement, the NDP appears to have handed out a backgrounder which presents the program in quite different and more restrictive terms.  The most detailed account of the program was published by Global News, which noted that the loan forgiveness would only kick in after the five-year waiting period and would be subject to an income-test: to wit, full-forgiveness would only kick in if the borrowers household (not individual) income was $60,000 or less.  Above that, forgiveness would be phased out at fifty cents on the dollar so that past $100,000 there would be no forgiveness at all. 

I’ve seen a couple of estimates of how many people this would help and what it would cost, but I’m not hugely convinced by any of them.  The latest data I’ve seen on earnings five years out from graduation is EPRI data from the class of 2010 and suggest that at an individual level, a $60,000 threshold would probably include a majority of college graduates, roughly half of bachelor’s graduates, and substantially less than half of master’s and doctoral graduates.  The problem is that the criteria is based on household income, so if any of these graduates have partners who work, the likelihood of getting forgiveness will be substantially reduced (I know this makes no sense, but all current student loan repayment policy is based on household income, and the NDP is just building off the current scaffolding). This likely then costs in the $1 billion range annually, with a big additional expense of $3-4 billion in year 1 as it applies retroactively to people already in repayment.

So, what to make of this?

From a policy perspective, I’d say this is mostly a good thing.  The NDP has worked out that aid is more effective with some kind of income-testing, which seems like a real step forward.  Sure, their headlines were about a far-future deeply-regressive free tuition policy, which for some reason is very popular in progressive circles, but you can see this as brilliant too, if you want.  Singh chose to adopt a reasonably sensible policy rather than the popular-but-regressive one his party prefers, but by talking about free tuition as a long-term goal, he can keep the loud end of the party sweet. 

Perhaps more importantly, this new policy is something the federal government can do on its own.  Free tuition, for reasons I have explained before, is not something the federal government can easily impose on provinces: but a federal debt remission policy is relatively simple to implement: and indeed, unlike a growth in upfront grants, it’s hard for provincial governments to game and grab federal dollars via displacement.  It suggests, in fact, a real sense of how education and federalism interact, which I think shows real maturity.

(One of the great untold stories of the pandemic is that an awful lot of the billions of dollars the feds poured into student aid by doubling the Canada Student Grant was absorbed by provincial student aid programs and not passed on to students.  Sometime before the budget I’ll get around to sketching this out how this happened, but for now, just know this NDP program mostly avoids this problem).

Now, it should go without saying that none of this money will improve access to education.  The NDP will try to claim the opposite, but there is zero evidence anywhere in the world that a payment five years after the end of studies has any influence on post-secondary attendance. It’s pretty much a straight transfer to – mainly – middle-income individuals in their 20s.  It’s not going to go to lawyers and dentists, but neither is it going to go to the truly needy in that age bracket – those who never managed to make it to post-secondary.  Whether you think this is a good use of money probably depends on how angry you are about housing prices and whether the young need some kind of compensation for them.  But even then, it’s still less effective as far as access is concerned than even the smallest targeted up-front grant program.

More perplexing still, perhaps, is why the NDP felt the need to hide the details of the policy on its own website.  One assumes it’s because a lot of New Democrats will instinctively recoil from targeting even though it’s objectively a better use of money.   And the less said about the party’s view that any form of interest is “profiting off students”, the better.  Not only is such a view staggeringly incorrect but it suggests that the party’s understanding of the time-value of money is rooted somewhere on the other side of the renaissance. 

And so, I would call the policy very much a mixed bag.  Parts of it look savvy, parts look deeply amateur.  What it tells you about the party and its readiness to govern is pretty much anyone’s guess.