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Since 2011, the amount of grant aid available to students has increased enormously in Canada.  Partly that’s due to the 2016 Federal, Ontario and New Brunswick budgets, which shifted a whole whack of tax credits to grants, as well a more long-term shift towards grants and away from loans in both Ontario and Quebec as well as, more recently, Prince Edward Island as well.  The shift isn’t universal of course – in the other 7 provincial programs loan/grant mixes have stayed pretty constant (except in Alberta where the trend has been from grants to loans), but overall there’s something on the order of an extra $1.2 billion more in government grants for Canadian students than there was at the start of the decade.

So, student debt must be about to fall a lot, right?  Especially as those big 2016 changes cycle through the system?

Wellllll…maybe.  It’s a bit more complicated than that.

As I’ve noted before (here, here and here) student debt has been reasonably stable in Canada for the last two decades, thanks partially to improving youth labour markets, higher parental savings (a delayed effect of the 1998 introduction of Canada Education Savings Grants), relatively low inflation and tuition increases, and an overall improvement in grants since the early 2000s.  The case for future declines in debt rest on these trends remaining stable and grants increasing sharply, as they have since 2016.

But think for a moment about what student borrowing is, in mathematical terms.  It’s (more or less) assessed costs, minus assessed resources, minus grants.  For borrowing to decrease, the combination of assessed resources and grants have to be rising faster than costs.  What people tend to overlook, however, is the way that while grants have been rising, changes to government need assessment over the past few years have meant that assessed resources are falling, too.

To be perfectly clear here: it’s not that student resources are declining.  There isn’t some epidemic of job loss/low pay/whatever.  It’s their assessed resources.  Governments have altered the way they count certain types of resources, most notably labour income of various kinds.  This change has largely come at the request of students, who have since forever wanted to reduce clawbacks on earned income.  By allowing students to keep more income without penalizing their ability to borrow, governments have made life more comfortable for students (which, on the whole, is probably a good thing), but they way they have done so is by allowing them to borrow more, which leads to greater debt.  This extra debt may or may not outweigh the extra grant (my guess is it will, slightly), but the point is it is going to move the needle in the opposite direction.  More grants and more loans means debt will stay just about the same.

Complicating the calculations somewhat further is the fact that the number of people on student aid appears to be rising quickly.  Mainly this is because of Ontario’s new targeted free tuition policy, which is leading a lot of people to apply for aid who formerly didn’t touch it.  All these people applying for grants are also eligible for loans.  It’s not clear yet from the publicly-available statistics if they are choosing to take them up, but if they are it will have a downward impact on average debt numbers for the first few years at least (new borrowers graduating with fewer years of borrowing will tend to have lower total debt).  That is to say: total borrowing may be rising, but the effect on average borrowing is unclear and the effect on average debt at graduation is likely to be negative, at least in the short term.

None of this should be interpreted as criticism.  More grants are good, particularly since they are targeted directly on income, and raising student living standards is good too.  Student debt is not bad so long as repayment conditions are such that debt is repayable without too much difficulty, and in that respect, current conditions are as good as they’ve been since the early 1990s.  So there’s no reason to think of any of this as a policy failure.  We just shouldn’t be either surprised or upset to see that one particular variable – debt – isn’t behaving as expected.