Public discussions about access to post-secondary edu- cation 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 knowl- edge-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 exten- sive 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 prop- erly inform discussions about how best to improve access to post-secondary education in Canada. (Note: all men- tions of changes of costs or expenditures over time cited in the text or in the figures have been adjusted for infla- tion 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 18- to 21-year-olds attended college or university in 2002-03, ”” an all-time high. In terms of absolute num- bers, 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 ”œbaby 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 ”œdouble 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 enrol- ment 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 three- quarters of the growth in full-time uni- versity enrolment during the 1980s and 1990s. As a result, their share of the entire full-time university popula- tion 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 sci- ences 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 never- theless been overshadowed by the larger enrolment growth among female students.

The overall increase in demand for a university education is remark- able 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 dol- lars) 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 dol- lars), 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 enter- ing the post-secondary system than ever before, the gap between the par- ticipation 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 addi- tion 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 post- secondary 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 pres- sure on grades is a particular obsta- cle to lower-income students. Research has demonstrated the link between the academic performance of children and their socio-econom- ic circumstances. Children in low- income families, for instance, are more likely to have missed out on the kinds of family, school and com- munity support that tend to foster academic achievement.

Other factors come into play as well, such as the fact that lower- income families appear to be less well- informed about existing opportunities in post-secondary education (includ- ing the actual costs and the availabili- ty of financial assistance) and less aware of the economic benefits. Again, the absence of sufficient support, or of ”œcultural capital,” makes a difference. Lower-income youth may not see post- secondary 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 world- view. Since they do not intend to seek a post-sec- ondary education, they do not encounter tuition costs as a potential barrier to fur- ther studies.

Taken together, the presence of barriers which go beyond direct financial ones means that improving access for those groups currently under- represented in post-second- ary education requires solutions that go much deeper than controlling tuition. The problems related to aca- demic abilities and educational ambi- tions need to be addressed through a variety of interventions beginning at a fairly young age. Until more low- income youth become high academic achievers and start to set their sights on a university education, the effec- tiveness 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 ris- ing, it should follow that total stu- dent 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 pro- grams 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 borrow- ers has fallen, so has the inflation- adjusted amount borrowed per year. The average amount borrowed per stu- dent 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 pre- vents 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 stu- dents who borrowed through govern- ment 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, com- bined 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 stu- dents. 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 fin- ished 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 stu- dent 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 univer- sity 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 stu- dents meet the costs of their college or university educations. Governments indeed are spending more: transfers to individuals for post-secondary educa- tion 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 deliv- ered 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 expendi- ture on education tax credits. Dur- ing 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 intro- duction of a monthly education credit for part-time students and a change in the rules that allowed stu- dents 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 gov- ernment 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 col- leges 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 bene- fits, available to all students and fam- ilies. The distinction between need-based and universal forms of assistance is not based on whether or not the recipient of the money actu- ally ”œneeds” it ”” rather, the distinc- tion 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 contribu- tions, not everyone is equally able to benefit because of variation in fami- lies’ abilities to save). Broadly speak- ing, 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 propor- tion of post-secondary education transfers to students and their fami- lies delivered on the basis of need. In 2001, for the first time, non-need- based 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 rep- resents 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 stu- dents most likely to have difficulty making financial ends meet while pursuing their studies.

Two other related trends in gov- ernment expenditures are worth not- ing 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 rela- tive 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 propor- tionately. Thus, at the same time as Ottawa has attracted criticism for allowing its share of health care fund- ing 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 por- tion 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-sec- ondary 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 institu- tions has slipped from 87 percent in 1990 to 78 percent in 2002. This change is taking Canada a step closer to a type of ”œvoucher” system where money bypass- es institutions and goes directly to indi- viduals, 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 addi- tion, by dealing with individuals through the federal tax system, the gov- ernment of Canada avoids having to convince the provinces to accept a fed- eral 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 col- lege 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 finan- cial 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 avail- able to all students, rather than being targeted to those who need it most.

Should we really expect govern- ments to do more? Taxpayers wondering whether we can really afford more pub- lic investment in post-secondary educa- tion need only review the costs and ben- efits. 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 govern- ment transfers to individuals (in the form of payments under pro- grams such as employment insurance or social assis- tance). For those without a high school degree, the situ- ation 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 invest- ment to encourage disadvantaged stu- dents 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 universi- ty, but also for society as a whole.


For more information about The Price of Knowledge 2004: Access and Student Finance in Canada, visit earch/factbook.htm 

You are welcome to republish this Policy Options article online or in print periodicals, under a Creative Commons/No Derivatives licence.

Creative Commons License