My proposal is, of course, predicated on the assumption that the new money would be wisely spent and result in significantly improved — not just more
36 For example, the nature of the federal contribution would have to be decided in the context of postsecondary education’s being a provincial matter, although the federal government currently provides funds in the form of block transfers (the Canada Health and Social Transfer), the research granting agencies, the CSLP itself, the new Canada Millennium Scholarship Foundation Bursary Program, infrastructure spending programs, and so on.
The health of the country’s post- secondary system is at stake, and if something is not done, Canadians will be paying for this continuing disinvestment for many years to come.
expensive — postsecondary schooling in this country. International studies regularly conclude that, although Canada spends a higher percentage of its gross domestic product on postsecondary education than do other industrialized countries and has a large proportion of its population go on to the postsecondary level, the performance of the system is not judged to be equally stellar. One well-known report, for example, concludes that “Canada spends a lot on education, but does not seem to be getting good value for money” (OECD 1992, 76).
The fundamental questions regarding the what, how, and for whom of Canada’s postsecondary education system thus could use some rethinking. For example, one option would be to reverse the trends of the 1960s and close or merge certain institutions or concentrate research efforts at selected places while leaving others to focus on teaching, as is done in many other countries. The discussion here is, therefore, offered with an understanding that, with or without an infusion of more money, substantial reform might well be appropriate — and that money without reform would run the risk of its not being used as efficiently as it could be.
Conclusion
The empirical evidence presented in this Commentary has led to a number of policy proposals that, taken together, constitute a fairly specific program for providing financial assistance to Canadian postsecondary students in the years to come.
Let us first review the key empirical findings. First, average borrowing levels and corresponding debt burdens have, at least as far as the most recent data show, not been excessive. Second, the vast majority of postsecondary graduates do not appear to have encountered difficulties with the repayment of their student loans. Third, students have tended to increase their borrowing when given the chance, indicating that borrowing has been supply constrained and that more funds have been wanted and needed to help Canadians finance their studies.
Meanwhile, though, tuition rates and other schooling costs have been rising, leading to concerns that access to the postsecondary system is becoming
increasingly limited, especially for those from middle- and lower-income families. The key policy issue is, therefore, to identify the fairest and most efficient means of providing financial assistance — and probably greater amounts of it than ever before — to postsecondary students in this country.
The basic idea proposed here is to focus on the development of an expanded student loans system, which should have the following characteristics. First, eligibility criteria should be relaxed, giving more individuals access to the system. Second, borrowing limits should be raised, making more funds available to those who need them; the program design should include special measures for students who face the skyrocketing tuition fees being charged for certain deregulated and other speciality programs.37Third, loan assistance in the post-schooling period should be significantly expanded, either in the form of further enhanced interest- relief and debt-reduction programs of the type introduced in recent years or
37 In Ontario, for example, medical schools now regularly charge $10,000 or more, certain business programs have even higher tuition fees, and even undergraduate engineering programs have seen substantial increases relative to other programs.
The key policy issue is, therefore, to identify the fairest and most efficient means of providing financial assistance to postsecondary students in this country.
through a more explicitly income-contingent repayment system that relates payments directly to individuals’ current income levels. In this way, students would have access to the funds they need, most individuals presumably could continue to pay back their loans without experiencing excessive hardship, and those who needed repayment assistance would be able to obtain it. In addition, a limited grants system would be targeted on those from lower-income families for whom debt aversion is seen as a particular problem and this extra subsidy is deemed critical to ensuring fair and equal participation in the postsecondary system for individuals from all family backgrounds.
Only the general outline of the proposal is set out here. Obviously, many details would have to be worked out and considerable fine-tuning would be required. But these broad guidelines, based on some relatively simple principles of fairness and efficiency, could form the basis of a full program design.
Such a system would, along with the existing sets of tuition fees, make for a rather finely tuned pricing and financial support scheme for postsecondary education in Canada possessing the following attributes.
• At anything like current tuition levels, governments would continue to provide heavy subsidies to the postsecondary system. All students, regardless of family background, would benefit because tuition would still cover only a relatively small portion — today, somewhere around a third — of the full costs of their studies (a small number of professional programs excepted), at least in the public colleges and universities that form the backbone of the system.
• Students from wealthier families, deemed ineligible for any sort of financial aid (loans or grants), would pay the full prevailing tuition schedules and related costs on the grounds that they should be expected to do so for the variety of equity and efficiency reasons discussed above.
• Students from middle- and lower-income families who qualified for government loans would benefit from the availability of funds from that system and from the various general subsidies contained therein (such as the government’s paying the interest on student loans while the individual is in school and the favorable interest rates during the payback period previously negotiated between the government and the banks).
• Students who went on to successful careers with good earnings levels would be expected to pay back the full amount of their loans for the same reasons that those from higher-income families would pay for their education up front — they could afford to do so, and various equity and efficiency factors argue in favor of it.
• Individuals who experienced problems with their debt loads would, on the other hand, be helped through expanded interest-relief and debt-reduction programs — or through a more general shift to an income-contingent
repayment program. Even those borrowers who did not receive such assistance would benefit from the insurance aspect it offered, a potentially potent tool for combating the debt-aversion problem that may currently deter qualified individuals from pursuing postsecondary studies.
• Those from lower-income families for whom debt aversion is deemed to be a particularly significant problem — even in the face of the assistance described above — would receive grants (perhaps mixed with loans) in their overall
Many details would have to be worked out and considerable fine- tuning would be required. But these broad guidelines, based on some relatively simple principles of fairness and efficiency, could form the basis of a full program design.
financial assistance package, effectively offering an additional incentive to pursue postsecondary studies.
How would such a system differ from the current one? In some ways, not a great deal. Most of the elements are already present, although in different forms and to different degrees across provinces. Some particular suggestions, however, would mean substantial reform. These include expanding eligibility for loans, raising the limits for borrowing, offering considerably more assistance to those who encounter difficulties in the post-schooling period, and, perhaps most significantly, favoring loans over grants as the appropriate vehicle for delivering financial aid to students. In addition, changes along the lines described above could provide the means of raising some desperately needed new funds by making viable additional payments on the part of students, along with contributions from both the provincial and federal levels of government — an option that would be much more problematic without the sorts of reforms suggested here.