Public discussions about access to post-secondary education in Canada tend to take as their starting point three pieces of conventional wisdom. The first is that a post-secondary qualification of some kind is a necessity for those who wish to reap the benefits of today’s knowledge-based economy. The second is that rising tuition costs have effectively put a university education beyond the reach of many Canadians. The third is that, in the face of high tuition costs, those who do attend are graduating with escalating burdens of student debt.
The 2004 edition of The Price of Knowledge, an extensive report on access to post-secondary education and student finance published in November by the Canada Millennium Scholarship Foundation, shows that while much of this conventional wisdom is true, it is true only up to a point, and some of it needs to be qualified. What’s more, there are a number of less-well-known trends that need to be brought to light in order to properly inform discussions about how best to improve access to post-secondary education in Canada. (Note: all mentions of changes of costs or expenditures over time cited in the text or in the figures have been adjusted for inflation and are presented in 2003 real dollars.)
A post-secondary education is clearly an advantage given the importance of knowledge and skills in today’s economy. This is something that more and more Canadians have come to recognize. Just over one-third of 18to 21-year-olds attended college or university in 2002-03,— an all-time high. In terms of absolute numbers, enrolment in universities experienced a startling jump of 20 percent in just the last five years (figure 1). This is not being driven by any sort of “baby boom,” since the size of the 18-21 cohort of the population has been growing at a rate of only 1 percent annually. Nor is the boom in university enrolment attributable solely to the absorption of Ontario’s “double cohort” after the province eliminated grade 13. Certainly a good portion of Ontario’s recent 31 percent increase in university enrolment stems from that shift, but other provinces, notably BC and Manitoba, have experienced large enrolment increases as well (figure 2).
One factor that has helped to fuel enrolment growth is the growing expectations of young women in Canadian society. Female students accounted for approximately threequarters of the growth in full-time university enrolment during the 1980s and 1990s. As a result, their share of the entire full-time university population increased from 45 percent to 55 percent. Female enrolment still lags behind male enrolment in a few select fields of study, such as the physical sciences and engineering, but in most fields of study females are now in the majority. Since enrolment for both genders is on the rise, male enrolment— which was declining in the late 1990s— is at its highest level in the past six years. This growth has nevertheless been overshadowed by the larger enrolment growth among female students.
The overall increase in demand for a university education is remarkable in and of itself, but it is even more noteworthy given that it has occurred despite rising tuition costs. University tuition is up 99 percent over the last ten years, or 65 percent over and above the rate of inflation. College fees, while much lower, are up 139 percent (or 82 percent in real dollars) in provinces other than Quebec (Quebec’s CEGEPs do not charge tuition). Average university tuition in 2003-04 was $4,025, compared with $2,435 in 1993-94 (in 2003 real dollars), and ranges from a high of $5,557 in Nova Scotia to a low of $1,862 in Quebec, where tuition fees have been frozen for a decade.
To point out that enrolment increases have occurred alongside tuition increases is not to argue that higher tuition poses no barrier to access. We need to do more than count the number of Canadians who are attending post-secondary institutions. We also need to look at who is going and who is not. The fact remains that children from higher-income families are twice as likely to attend university as those from lower-income families – a matter of concern to those interested in equalizing economic opportunity in Canada. While the overall growth in enrolment means that more students from lower-income families are entering the post-secondary system than ever before, the gap between the participation rates in university of those from lower-and higher-income backgrounds appears to have remained more or less constant.
We need to look at factors in addition to tuition, however, if we want to be able to address the equity issue in a comprehensive fashion. There are, for instance, academic barriers to access as well as financial ones. When asked why they are not pursuing a postsecondary education, almost as many non-attendees cite academic reasons as financial ones. When parents are asked why they think their teenagers might not go on to university, twice as many mention their grades as mention the expected cost.
This is why it is so important to note that tuition increases have been coupled with stiffening university entrance requirements. The high school average needed to gain admittance has climbed ten points over the past ten years, from 74 percent to 84 percent (figure 3). As with tuition increases, the pressure on grades is a particular obstacle to lower-income students. Research has demonstrated the link between the academic performance of children and their socio-economic circumstances. Children in lowincome families, for instance, are more likely to have missed out on the kinds of family, school and community support that tend to foster academic achievement.
Other factors come into play as well, such as the fact that lowerincome families appear to be less wellinformed about existing opportunities in post-secondary education (including the actual costs and the availability of financial assistance) and less aware of the economic benefits. Again, the absence of sufficient support, or of “cultural capital,” makes a difference. Lower-income youth may not see postsecondary education as a genuine option, not only because of the cost (perceived and real) or their academic ability, but simply because it is not part of their worldview. Since they do not intend to seek a post-secondary education, they do not encounter tuition costs as a potential barrier to further studies.
Taken together, the presence of barriers which go beyond direct financial ones means that improving access for those groups currently underrepresented in post-secondary education requires solutions that go much deeper than controlling tuition. The problems related to academic abilities and educational ambitions need to be addressed through a variety of interventions beginning at a fairly young age. Until more lowincome youth become high academic achievers and start to set their sights on a university education, the effectiveness of financial policies to favour access to university will be limited.
For those who do gain entry to a university or college, help in meeting tuition and living costs is available in the form of student loans and grants. This brings us to the issue of student debt. If more students than ever are enrolled at the post-secondary level, and if tuition and living costs are rising, it should follow that total student borrowing and accumulated debt are rising too. The fact is that they are not, and it is important to understand why.
What exactly is going on? First, the number of students borrowing from government student loans programs is down from the high of 529,354 reached in 1996-97, to 460,763 in 2002-03. This is not because fewer students need support. Certainly, some students are benefiting rom the greater availability of grants (including those provided by the Canada Millennium Scholarship Foundation) and from the take-up in the Canada Education Saving Grant program. A greater part of the drop in borrowing, though, is due to the fact that student loans are harder to get. Rule changes have eliminated some students in high-cost programs at private institutions, as well as some repeat borrowers with poor credit histories. The end result is fewer borrowers.
As the number of student borrowers has fallen, so has the inflationadjusted amount borrowed per year. The average amount borrowed per student inevitably falls when some of the highest borrowers are made ineligible for student loans. At the same time, the maximum amount that can be borrowed has been capped, which prevents further increases in borrowing for those students already borrowing the maximum and means that the real value of the maximum loan steadily erodes in face of inflation.
If annual borrowing is falling, then it follows that accumulated debt upon graduation is falling too. This is true, at least in the most recent years. In 2000, the average level of student debt— for the roughly one in two students who borrowed through government student aid programs— stood at $20,495 (measured in 2003 dollars). No comparable figure on public debt for more recent years is available, but a recent study shows that, in 2003, combined debt from public and private sources stood at $20,030. This implies that debt solely from public sources is lower than it was in 2000.
This does not mean that student debt is no longer a concern. First of all, the change since 2003 does nothing to make up for the fact that public debt levels are about three times higher today than twenty years ago (not counting increases due to inflation). Second, while overall borrowing and debt is down, debt remains high in certain provinces and for certain students. In Newfoundland and Labrador, for instance, where many students face the higher costs associated with a move away from home in order to attend university, average student debt for a university undergraduate stands at 144 percent of the national average (figure 4). More generally, in 2000, over 13 percent of undergraduates finished their studies with student debt exceeding $25,000. That included 18 percent of Ontario graduates and 39 percent of those in Newfoundland.
A third point is that the drop in student debt from public loans may have been partly offset by the fact that a number of parents take out loans to help finance their children’s studies and by an increase in borrowing from private institutions (unfortunately, there is a lack of reliable figures on the amount of private borrowing to finance university and college education. Beyond the issue of the extent of the student debt problem, there is the related question of whether governments are getting as much as they can out of the money they are currently spending to help students meet the costs of their college or university educations. Governments indeed are spending more: transfers to individuals for post-secondary education reached a high of $4.2 billion in 2001, a figure that is more than twice that of a decade earlier.
Very little new money, however, has flowed into what is traditionally thought of as student assistance programs— loans and grants delivered on the basis of an assessment of students’ financial needs. In fact, in the first three years of this decade, government spending on need-based loans and grants averaged the same as it did in the last five years of the 1990s.
What has increased— and sharply— is government expenditure on education tax credits. During the late 1990s, the government of Canada introduced a series of new tax benefits aimed at students. These included a tax credit for interest payments on student loans, an increase in the education credit, increased RESP benefits, increased tax exemptions for scholarships and awards, an expansion of the tuition tax credit to include ancillary fees, a quintupling of the value of the monthly education credit, the introduction of a monthly education credit for part-time students and a change in the rules that allowed students to carry forward any unused tax credits to future tax years. It is easy to overlook the significance of these changes, but when the figures are tallied, they show that the value of these federal education tax credits has tripled since 1995. In 2000, for the first time ever, the federal government committed over $1 billion to tax expenditures for Canadian students, and the total reached a projected $1.8 billion in 2004. Including provincial tax credits, the total estimated tax expenditures on students in Canada in 2004 equalled $2.3 billion. To put this in perspective, it is roughly equivalent to the total of all government transfers to colleges and universities in Manitoba, Saskatchewan and the four Atlantic provinces combined.
Unlike student loans and grants which are delivered on the basis of an assessment of students’ financial needs, tax credits are universal benefits, available to all students and families. The distinction between need-based and universal forms of assistance is not based on whether or not the recipient of the money actually “needs” it— rather, the distinction is based on the eligibility criteria.
Need-based programs are targeted programs with a means test, whereas everyone is equally eligible to benefit from universal programs (although in the case of the Canada Education Savings Grant program, which sees the government of Canada top-up individuals’ initial RESP contributions, not everyone is equally able to benefit because of variation in families’ abilities to save). Broadly speaking, then, student loans and grants are need-based expenditures, while tax credits and education savings grants are non-need-based. The exception to this rule is the tax credit for interest paid on a student loan, which is need-based in a retrospective fashion (i.e., anyone can benefit from the credit, provided that at some point in the past they passed a need test and obtained a student loan).
The growth in the value of tax credits and Canada Education Savings Grants has meant that there has been a decrease in the proportion of post-secondary education transfers to students and their families delivered on the basis of need. In 2001, for the first time, non-needbased assistance formed a larger part of these transfers than need-based assistance. Since then, the shift in emphasis has continued: need-based student financial assistance now represents only 41 percent of the total. To put it more plainly, whereas a decade ago seven out of ten dollars spent on post-secondary transfers to students and their families were delivered on the basis of need, today only four out of ten are. So while governments are spending more to assist students, a lesser share of the total is being set aside for those students most likely to have difficulty making financial ends meet while pursuing their studies.
Two other related trends in government expenditures are worth noting here. First, the federal government’s increased interest in helping to finance post-secondary studies through tax credits has meant that there has been a shift in the relative shares of funding provided by the two main levels of government. The federal share of transfers to students and their families for post-secondary education has risen from 42 percent in 1997 to 69 percent in 2002, while the provincial share has dropped proportionately. Thus, at the same time as Ottawa has attracted criticism for allowing its share of health care funding to fall, its share of funding to assist college and university students has increased. This has generally gone unnoticed, since most of this increase has come through taxes not collected rather than through new spending programs, and since the money is not targeted to students facing the greatest financial barriers to participation in university or college.
Second, the growth in federal tax expenditures has meant that a lesser portion of total government spending on post-secondary education is flowing to institutions and a greater portion is directed to individuals (students and families). Of course, transfers to post-secondary institutions still account for the largest portion of the spending, and have been rising since the period of fiscal restraint of the 1990s. Overall spending on institutions is currently at an all-time high, having reached just over $14.5 billion in 2002. Despite this, the proportion of all post-secondary education transfers that went directly to institutions has slipped from 87 percent in 1990 to 78 percent in 2002. This change is taking Canada a step closer to a type of “voucher” system where money bypasses institutions and goes directly to individuals, as is the practice in the US.
The incentive for governments, and especially the federal government, to invest in post-secondary education by means of tax expenditures is clear. In the first instance, it can be presented as a form of tax relief to families. In addition, by dealing with individuals through the federal tax system, the government of Canada avoids having to convince the provinces to accept a federal spending program in a contested area of jurisdiction. Spending that serves some policy goals, however, does not necessarily serve others. In this case, it is not at all clear whether this type of spending is the most effective way for governments to help those currently under-represented at the post-secondary level gain greater access to the system.
Where do all these changes leave us? The overall results are mixed. On the one hand, a record number of Canadians are going to college or university—clearly good news— and governments are spending more than ever on post-secondary education. On the other hand, many Canadians— in particular those from less privileged economic backgrounds— continue to face significant financial and academic barriers to obtaining the educational opportunities they need to move up the ladder. While governments are spending more, most of the new money is being made available to all students, rather than being targeted to those who need it most.
Should we really expect governments to do more? Taxpayers wondering whether we can really afford more public investment in post-secondary education need only review the costs and benefits. University graduates make up just about 15 percent of the population between the ages of 18 and 65, but pay 33 percent of all personal income taxes and receive eight percent of all government transfers to individuals (in the form of payments under programs such as employment insurance or social assistance). For those without a high school degree, the situation is reversed: they receive a disproportionate share of transfers and pay a far lesser share of taxes. Thus, not only the country’s economic prosperity but also its social safety net need an increasingly educated and skilled workforce to keep it going (something which should give pause even to those who think that health care is the only policy game in town). Investment in post-secondary education— including long-term investment to encourage disadvantaged students to set their sights on post-secondary education and secure the means to pay for it— pays off, not only for those who attend college or university, but also for society as a whole.
For more information about The Price of Knowledge 2004: Access and Student Finance in Canada, visit www.millenniumscholarships.ca/en/res earch/factbook.htm
