Canada’s Affordability Policies Are Worth a Good Long Look

Canada does not get a lot of love from international higher education scholars.  Partly, it’s because no one wants to wade through the tedium of deciphering our ten different systems, and partly it’s because very few innovative ideas in higher education emerge here (we’re good at copying, less so at originating).  But in affordability policy, Canada has been genuinely – if somewhat accidentally – innovative.  Canada is perhaps the one country which is getting “high tuition/high aid” right, and for that reason is worth careful study.

Most Canadian provinces – Quebec and Newfoundland partly excepted - moved decisively in the direction of greater private funding of higher education in the 1990s.  Amidst a dreadful currency and public finance crisis, which coincided with the near-fatal unity debates of the early 90s, universities were encouraged to raise fees for most of the 1990s.  During that decade, fees regularly rose by 6 or 7% above inflation every year, student grants were cut, loans were expanded, and among the 50% or so of students who borrowed for their undergraduate degree, average student debt more than doubled, to about $20,000.

Then, around 2000, everything changed.  Provincial governments started putting the brakes on tuition, though not completely – they continued to rise steadily at 2% per year (after inflation) – and they stopped cutting student aid. Instead, and in Ontario in particular, provinces began re-investing in grants.  The federal government also spent billions on grants through the Canada Millennium Scholarship Foundation (a curious ten-year experiment in federalism and student aid delivery) and then billions more when it replaced the Foundation with a set of new Canada Student grants.  It created an Education Savings Grants program (the U.S. equivalent would be  government top-ups of 529 contributions, with the size of the top-up tied inversely to family income) which now provides almost a billion dollars a year.  Over half of all Canadians under-18s now have registered Education Savings Grants accounts.  Both levels of governments also ramped up tax relief to all students and families by over $1 billion per year.

Institutions started stepping up their game as well:  in 1995, they were giving out about $300 million in scholarships to their students.  20 years later, that figure had increased sevenfold to over $2.1 billion.  Most of it is assistance to graduate students – an effect perhaps of the increased drive for research-intensity rather than a concern for affordability - but still a major contribution to overall access.

After all of this effort, student debt has stabilized or even dropped slightly.  Total non-loan assistance to students – that is, all forms of grants, scholarships and tax relief thrown together – has risen to over $9 billion annually, which, by a stunning coincidence, is almost exactly what Canadian universities and colleges take in from domestic students in tuition. This means that Canada – despite having tuition fees which are on the high side internationally (roughly US$6,000 per year) – has net zero tuition.

This is not necessarily to say that Canada’s is a perfect system of high-tuition/high aid.  Too much grant aid has historically been given away on a universal, or non-need, basis for it to earn that distinction.  But even here, the system gets better year by year.  The $2.6 billion Canada gives though the tax system was always more progressive than US tax assistance in three ways: they are delivered by family-income-neutral credits rather than regressive deductions, they can be carried-forward if the recipient has insufficient income to use them in the present year, and the aid is not clawed back if the student also receives a Pell-like grant. 

But Canada can make aid more progressive still, mainly by converting those tax credits, which give away equal amounts of money regardless of need, into grants based on family income.  Which is precisely what is happening, albeit not uniformly.  The federal government slashed its tax credits substantially to increase its own grant program by 50%, and the provinces of New Brunswick and Ontario eliminated theirs to pay for Targeted Free Tuition policies not entirely unlike the one in Chile, in which students from below-median income families get grants equal to tuition

In the United States, the appeal of high-tuition/high aid is that, in theory at least, it protects access while allowing institutions to raise money and maintain quality.  The downfall has always been that in practice it seems a lot easier to maintain high fees than it is to maintain high aid.  It is this failure which has pushed many into supporting free tuition as an alternative, arguing that the only way to make education affordable to the poor is to make it free to the rich. 

That may indeed be true in the United States, though it is less clear that it is so in other countries headed in the free-tuition direction, such as New Zealand.  What Canada shows is that other political outcomes are possible, and that a high-tuition/high-aid equilibria can be maintained, under the right conditions.  For that reason alone, Canada’s student aid system is worth some international attention.