Do Tuition Rates Matter?

Alex Usher is a frequent commentator on post-secondary education in Canada.  He regularly blogs for the Globe and Mail at 

Yesterday, he wrote an open letter to leaders of Canada’s three major political parties in which he offered advice on post-secondary education policy.

I found the following passage to be particularly provocative:

First, scratch anything that vaguely resembles a policy on tuition fees. No credible research shows tuition to have a substantial impact on access, and, in any case, it is entirely a matter of provincial jurisdictions. 

Even policies like paying provinces to reduce fees (NDP policy from 1997 to 2006) or rebating fees to students (Liberal policy in 2006) have weird distributional consequences because they would involve vastly different subsidies to different provinces, based on existing tuition. 

Money in student aid is a slightly more promising idea because at least it’s targeted.  But you might want to keep your powder dry on this one. Student aid costs are already set to rise significantly over the next few years as interest rates rise … and the jury is still out on whether the recently-introduced Canada Student Grants are going to cost what was originally predicted or if the recession and lax eligibility criteria will blow the lid off costs. 

He then added:

If you absolutely must pour money into student aid, do yourself a favour and make sure it’s cost-neutral; whatever you stick into student aid, you should take away from education and textbook tax credits. These cost a tremendous amount of money and achieve absolutely nothing.  Everyone knows they only exist because they are a cheap and convenient way for the federal government to shovel money to the middle class without having to deal with the provinces.  Cutting these would offend no one in the sector; if you cut them and redistributed the funds elsewhere in education, you would win plaudits.

I would like to offer three points in response to this.  First, according to a December 2009 report by the Canadian Federation of Students (CFS)-Ontario, average student debt load for a four-year degree in Ontario has increased by 350 percent in the past 15 years.  In other words, more bodies may be coming into Canadian universities, but they’re more broke upon graduation than they used to be.

Second, high tuition fees hit some groups harder than others.  As CFS-Ontario points out in another report, high tuition fees are particularly hard on students from racialised groups.  If equity matters to the leaders of our three major political parties, they should think twice before heeding Mr. Usher’s advice.

Finally, I am concerned about quality.  Indeed, as a full-time graduate student myself, I am concerned by how much my fellow students are working while they study.  Something I find particularly worrisome in my own PhD program is the number of students who, very early in the course of their studies (sometimes even in the first year of a PhD program), take on full-time employment.  I believe that high tuition fees exacerbate this.

I do not believe that high tuition rates are as innocuous as Mr. Usher suggests.


  • Interesting post.

    First off, I agree that Alex’s suggestions are eyebrow raising. I would think that tuition would have an effect on access — some people simply can’t afford to take on certain levels of tuition, even if sufficient loans are available.

    But I think some of Nick’s counterarguments are eyebrow raising as well.

    In response to Nick’s first point, the evidence on student debt is a bit startling. Although I wonder if we aren’t playing with a double-edged sword. Access to loans means more people can pursue an education. But if people are finding themselves in a career afterward that does not cover the cost of their already highly-subsidized education, should we really be encouraging them to take up that type of education in the first place?

    In response to your second point, I glanced through the CFS report and it’s pretty weak. It basically says “visible minorities have lower incomes on average than Caucasians; thus, tuition would make up a higher proportion of their income.” Most people don’t need to read a report to realize that. The CFS conclusion is a lot different than saying that “controlling for income, visible minorities struggle with increases in education cost (e.g. are more likely to default on loans, drop out of school, etc.). If you want to create policies that redistribute income or create affirmative action, fine, but I don’t see what the CFS report really creates to the discussion.

    In response to Nick’s third point, certainly classmate quality could be affected by the number of hours classmates work, and classmate quality could certainly negatively affect one’s own educational experience. But if you’re worried about quality, shouldn’t you also be concerned that lower tuition fees might mean less funding for universities and thus a lower quality education? And shouldn’t you also be concerned that lower tuition fees will increase enrollment, meaning that more people will graduate with the same degree as you and in turn dilute the value of your degree to a potential employer?

  • First of all, why does tuition rates keep outpacing the cost of living or greater or equal to the rates of the cost of medical? Is it because of those evil private unversities.

    There is only two ways this can go, because the prices are not going to stop increasing.

    Tution are not rising because of some grand scheme since public colledge tutions have kept equal to private increases in tution if not by more in some case by case.

    Now there is diffrent ways to handle this, but were most likly going to go for regulation to try to combat cost. Which is teachers salaries, to administrative salaries, compensation practices, pension, cost of business, etc. Basicly the government will get more involved in post secondary care through ultimatly price control. After all students now are arguably a minority getting abused.

    We will come up with solution of either targeting the universities and practices, we will get involved with their pay. We will try something, limiting or freezing tuitions. Maybe will try this on the student side, as other administrations have, and forgive the latter part of the debt if the student cant pay it back, or all of it.

    This however becomes costly, and is only half hearted attemp because as the cost of tutions gradualy rising, places a burden on taxpayers, which often results, turning the attention they wish to avoid back to the universities, and its workers. Right now with accelerating costs students are increasingly paying more for the same level education or less for what our parents, ourselves recieved.

    Often freezing or limiting the universities choice in tuitions fees, will result in greater then normal cuts to teachers, pensions etc, reduced pay, reduced hours,greater class sizes, etc. All while in some cases the bloated areas we want, remain in full swing, such as multi million dallar receational facilities to promote health and well being. Ie shortages for education long term. On the sudent side when tuition is limited, we ensure the most benefit goes to those with the top incomes and that were going to enter anyway.

    However once the rain stops, and I can see clearly, all the subsidy we give students like I, allow me, to bid prices higer then the student who cannot or chooses not to use the goverment subsidy. we can accept the higher price the university is charging, every year, regardless.

    If all goverment subsidy post secondary ceased, tuitons would collaspe just as housing prices. These prices can only survive based off cheap accomodavtive practices. If these markets were more dependant on cash as it was 10, 15, 30 years ago. As our parents parents, and my parents could get a job, and those savings were enough to gradute not in debt. Now the debt is getting so high, it is dictating your choices in a lot of fields, or not letting you enter distoring society as a whole. What kind of doctor as an example, specialist or primary care? you decide.

    This why inflation hurts us little people. If the high and mighty statistics are right, that there is low inflation, please explain to me after the greatest rescession since the great depression, how tuition prices could eke out the same average increase in costs annually exceeded the cost of lving?

    I would rather being paying for low tuitons, that allowed a student to gradute debt free, allowing them whatever choice and timeline on their cereers. Diluting one experience with a influx of entrants has already happened with higher subsidized tuitions, with a debtload to boot. It wasnt like these tutions got higher and class sizes got smaller, and less competetion post graduate. Even if there was more competetion, it still would redistribute naturally, people would make diffrent choices, with the education they garnered, then students flooding into the quickest way to pay of their new found debt of an albatross.

  • I think it’s worth pointing out that reducing tuition fees toward zero is a treaty obligation of Canada’s as a signatory of the International Covenant on Economic, Social and Cultural Rights.

    Second, we ought to think more generally about the possibilities for how to raise revenue to fund postsecondary education. In this light, isn’t it hard to imagine a less equitable way of gathering revenue than tuition, for obvious enough reasons?

    Yes, there are some tricky questions around this because of the many other non-tuition barriers to access (going all the way back to early childhood development), which then changes the composition of the student pool in post secondary education (and so too the distributional consequences of tuition fees – i.e., the notion of low fees as a subsidy to the middle class).

    But why wouldn’t we be saying let’s address these broader access issues AND let’s lower these regressive fees, as well as take our treaty obligations seriously?

    In any case, access is far from the only issue. Why would we want to set up a system where young people must go out into the world immediately saddled with large debts? Have we thought about the social and political consequences of this? Is it really the best we can do?

  • I’m a full time PhD student working full time, so I know exactly what you are talking about.

  • Former Student Leader

    If the CFS says it, it must be true?

  • I don’t see anything wrong with high nominal tuition fees. Mankiw quipped in one of his blog posts years back that Harvard practices perfect price discrimination: it nominally charges some $50 000/year in tuition and board but only a fraction of students — the ones who are able — pay this full amount. Most receive generous grants from the Financial Aid Office which roughly correspond to what they are willing/able to pay. This way Harvard receives as much revenue as possible without restricting access.

    That’s what a want to see implemented in my province: a comprehensive system of government grants which ensures that families and students pay what they are able to. As we can see from the high default and forgiveness rates, borrowing to finance one’s education doesn’t indicate an ability to pay.

    Such a system would obviously require a tuition ceiling to tame greedy universities as well as a large team of bureaucrats to assess each individual’s “ability to pay,” but it would prevent wasteful subsidies to the middle class (which seems to be one of Usher’s main gripes) while ensuring that help goes to those who need it most. Perhaps most important, it would ensure that no young person has to let finances get in the way of his life ambitions.

  • “Why would we want to set up a system where young people must go out into the world immediately saddled with large debts? Have we thought about the social and political consequences of this?”

    University graduates have a lot higher incomes on average than the general population. Why should we tax lower and middle class people to ensure the future rich don’t have as much debt coming out of university? A degree is an investment — we take on debt because we’ll make higher salaries to cover it off.

  • David seems to take the current situation as normal, but things were very different not so long ago. Not only was tuition much lower, loans made up a much smaller portion of the provisions for dealing with the expense of going to school. There were a lot more scholarship and grant programs; often a high but quite reachable GPA was enough to gain free tuition (I benefited from that last for a couple of years back in the eighties).
    In addition, student jobs tend to be near or at the minimum wage, which has fallen in purchasing power over the years. My parents tell of being able to take low-wage jobs and, if they lived in lousy lodging and scrimped, being able to save up money to live on so they could take courses the following year. You can’t do that any more, it seems like a pipe dream. Given all this, not to mention the ridiculous racket in costly textbooks, it shouldn’t be surprising that average debt on graduation has skyrocketed.
    I do recall a report a few years ago that concluded that education pays for itself in no uncertain terms, even just thinking about public finance: University educated people make more money and end up paying far more in extra taxes than their university education cost, making post-secondary education an excellent investment for governments. So even in narrow terms, David’s question “should we be encouraging them . . . ” is answered. Other dimensions would include the democratic advantages of having educated, knowledgeable citizens or the simple point that if a country should be ensuring its citizens’ quality of life and those citizens want to be educated, the state should be furthering that goal. Of course, the question itself is an elitist one. Who is this “we” who should or shouldn’t be encouraging “them” to get educated?

    David’s approach to the “quality” issue is peculiar. He seems to take the position of an individual student too well-off to have to worry about such things, only wondering whether it will be bad for this well-off student to have worse-off classmates who have to work. Similarly, he worries that this well-off student might have more competition if proles are able to attend university and graduate. This strikes me as downright bizarre, the opposite of the concerns relevant to policy. David, those classmates having to work *is* the quality problem–“classmate quality” is “quality of education for those students”. Yes, believe it or not, if you’re taking average quality of education, the quality of education received by your not-so-well-off classmates also counts!
    Similarly, successfully granting degrees to more students is generally considered a successful outcome; it’s what educational institutions are trying to do, even if certain well-heeled students who would be able to go even if others couldn’t might find the result is more competition.

    As to worries about lack of funding without high tuition fees: Given its financial advantages, it seems pretty clear to me that the way to fund post-secondary education is simply to fund post-secondary education. We could do it years ago and technology and productivity have improved since. We’re a wealthier society now than then, so if we could do it twenty years ago we can do it now. The problem is the turn towards imagining everything should be like a business, in a short-term sort of way, and away from thinking about either public goods or the public good.

  • Incidentally, I suspect high debt loads actually hinder students from finding or creating good careers. The need to quickly find something, anything, that will allow them to keep up with their debt payments will force graduates to think in the short term, stopping them from making more thorough searches for appropriate work or from starting businesses.
    The debt itself would make it harder to raise money to start a business or to feel free to take the risks involved.

  • As I suggested in my previous post, we shouldn’t just accept that university is a bastion for the middle and upper class. Yes, we should absolutely be concerned with addressing the array of structural inequalities that create that tendency, all the way back to early childhood education. We can do that and also defend the principle of the publicly-funded higher education system.

    That said, I think it’s incorrect to argue that, even today, public funding for higher education is a subsidy provided from low-income earners to high-income earners. First of all, if you cover both the revenue and expenditure side, higher education is still positively redistributive. See some rough calculations for the case of Ontario here:

    Of course, it would be even more redistributive if we tackled some of the broader barriers to access.

    Although access isn’t the only issue, I do think it’s a bit odd to argue that tuition fees have no effect on access. If you want to treat education from an economistic perspective, our first expectation should be that a higher price will tend to turn off potential consumers (especially those with very limited resources). From a more personal perspective, I have a number of friends who either left university or never started it because of these costs. Finally, the CFS, citing the 2002 Youth in Transition survey, reports that 70% of high school graduates not attending post-secondary education cite financial obstacles as the reason (I don’t have links for this – working off of research for something I wrote a couple of years ago; apologies).

    (Yes, Former Student Leader, I agree there are certainly lots of pretty serious problems with the CFS, although those issues aren’t particularly relevant here.)

    Purple Library Guy, you may have in mind this study about post-secondary education paying for itself:

    Allen, 1998, Paid in Full: Who Pays for University Education in BC? Allen, 1999, The Education Dividend: Why Education Spending is a Good Investment for BC.

    I’d like to say (and hear) more about the issue of students exiting education with heavy debts, but I’m going to be a bit cheeky and cut and paste a section of an article I wrote on the tuition issue (for lack of time). I thought it would be better than posting nothing, in case it’s of interest.


    Student debt has individual and social costs

    As the average student debt in BC for an undergraduate degree approaches $27,000, the accompanying financial burden on individual students (and additional disincentive to prospective students) presumably requires little elaboration.

    Yet, there is a further cost to these escalating levels of debt. In any society (and particularly in a society as wealthy as our own), young people completing their studies should be able to graduate in a position of freedom and opportunity, ready to pursue their goals and unleash their creativity in the economy and society as a whole. Those saddled with debt, however, face a different calculus in their decision-making. Like a stone, this debt hangs around their necks, holding them back and weighing them down.

    Suppose, for example, that a graduating student’s post-secondary education has awoken her to some political or social cause about which she feels strongly. Perhaps she wants to volunteer in a developing country for a year, or dedicate herself to activist work. Instead, encumbered by her $27,000 of debt, she is more likely to bypass these ambitions, and quickly become slotted into the workforce. Consider a law student, ready to pursue pro bono civil rights or public defence work; instead, she may need to join a large corporate firm so she can repay her (even higher) debts. Or, imagine a graduate wanting to start a new business; under the weight of debt, she is less likely to undertake this risk.

    Whatever the case may be, debt imposes constraints on decision-making, and student debt does so at a particularly crucial time in a young person’s life. Not only are the scenarios outlined above unfortunate for the individual, but, on the aggregate level, the effect is that society steers people away from low-remuneration, socially productive activities, as well as the risk-taking that is vital to successful entrepreneurship in the business world.

    Furthermore, consider again the average financial returns to post-secondary education (in higher average earnings and income tax revenues). While the government can be virtually assured of a return on its post-secondary education spending (because the returns are clear on average), a particular individual cannot. Depending on their choices of occupation, some individuals will necessarily find a lower than average earnings boost from their education, and some will find no net financial gain (even though they may be engaging in socially productive activity). As a result of the overall financial returns to post-secondary education spending, socializing the costs emerges as a win-win policy for both the public coffers and individual students.

  • I think Purple Library Guy’s analysis is a bit misguided.

    “Similarly, successfully granting degrees to more students is generally considered a successful outcome”

    I think this is true if we’re looking at things from a static point of view. Sure, more education is generally considered better. But why? Is it because the education magically makes us more productive, or because it gives the educated higher wages because it is a signal to employers of intelligence?

    If one believes that the signalling power of education is too important to be ignored, then we should be concerned about the number of people going to university. Higher graduation rates dilute the quality of the signal. Of course, if we believe that education has no signalling properties and simply enhances one’s productivity, then Purple Library Guy is bang on with his criticisms of my argument.

    Alex, thanks for that link about the fallacy of my argument that education redistributes from poor to rich; it was interesting. I guess it depends on one’s perspective of rich; it seems like the argument is false if we define people as “poor” or “rich” based on the wealth of an individual’s parents; if we define people’s status based on their own wealth (so that people who have poor parents but go to school, get a degree, and then become rich are defined as “rich” rather than “poor”), it sounds like the argument holds.

    But yes, I agree that it is odd to think that tuition prices won’t affect access. That’s a pretty bizarre argument for Alex Usher to be making.

  • TO David: I think the purple library guy is Bang on his criticism of your argument.

    I think education does have some sort of “signaling power”. However, I think, this “signaling power” of education is a bit of social construct, and a very subjective one. Hence, should not be part of any policy discussion. As an example, you know, society tends to show more respect to a PhD degree holder than a person with a Bachelor degree. In this case surely the PhD is indicating higher intelligence. Engineering degree seems to have the same signaling benefit over, as an example, History. There are plenty of history students far smarter than a plenty of engineering students, even though engineering students remain a lot busier in terms of their class commitments at least in undergraduate level. Eighty years ago a Bachelor degree in anything would have signaled intelligence in an equal scale of a PhD degree at present time, given the fact that large part of population did not possess that degree. Today however a greater percentage of the population does indeed have the degree. Did this dilute the earning of the Bachelor degree holders? People with university education still do enjoy higher income.

    So what happened in last, say, ninety years. As the number of Bachelor degree holder increased, so did the jobs that require the higher skill of Bachelor degree holders. As the technology progresses jobs or opportunities for the highly skilled workers will only grow. The need for skilled workers should be the basis of policy discussion regarding access to higher education rather than some subject argument of supposed “signaling power”.

    On another note, High school education is costly as well. Do we or did we make the sort of argument at any point in history that since the high school graduates tend to make more money than those who are not, then why should the high school or for that matter primary school education should be subsidized by those tax payers who has not attended or do not wish to attend? I think it is about time that post secondary education should be viewed in the same light, if not for individuals then at least for the sake of global competition. I particularly see no harm done if 100% of Canadian population has some sort of post secondary education, do you?

  • I’m a full time PhD student working full time, so I know exactly what you are talking about.

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