Ontario Election Promises on Tuition Fees: Room for Improvement

By Kayle Hatt and Erika Shaker

The Ontario election has been mostly focused on jobs and economic growth – and debating the credibility of PC Leader Tim Hudak’s proposal to cut the public service. However, Ontario also faces other problems worthy of attention, one of which is growing concern over the affordability of higher education.

The backstory:

Under Rae (NDP) and Harris/Eves (Progressive Conservative), tuition fees in Ontario rose from the early-1990s for the better part of a decade until they climbed to the second highest (on average) in all of Canada (second to Nova Scotia at the time).

When the McGuinty Liberals were elected in 2003, tuition fees were frozen from 2004-06, then continued to increase with a 5% cap each year. This, along with the deregulation of some programs where fees exponentially increased, made post-secondary education in Ontario the most expensive in Canada from 2009-10 onward. In 2013, the Liberals reduced the cap to 3% each year for undergraduate programs but tuition fees in other programs have increased by as much as 8% annually.

In 2011-12, the Liberals also implemented, as the centrepiece of their higher education strategy, a 30% Off Tuition Grant (not to be confused with an actual across-the-board 30% reduction in tuition fees). The base grant amount in 2011-12 was set at $1,600 and it has increased each year with the cost of inflation. Though it is designed for families with incomes up to $160,000, not all students qualify. For instance, it does not apply to graduate students, part-time students, or students who have been out of high school for more than four years.

You can compare the history of tuition fees for various provinces and programs using this interactive CCPA data app.

That brings us to the 2014 provincial election.

The main three parties’ political promises:

The Liberals announced in 2013 that they would cap subsequent annual tuition fee increases at 3%; they also intend to maintain the 30% Off Tuition Grant.

The Progressive Conservatives plan to eliminate the 30% Off Tuition Grant and, while their platform stipulates that “no Ontario student [will be] denied access because of a lack of money”, there is nothing specific that indicates how this is to be ensured. It likely simply means that they’ll continue to ensure all students have access to debt financing—although a 2013 Progressive Conservative policy paper recommended that student financial assistance be tied to marks (something that is problematic for several reasons and which no other Canadian jurisdiction does).

The Ontario NDP would maintain the 30% Off Tuition Grant, freeze tuition at 2014-15 levels (beginning Sept. 2015) and eliminate the interest on the provincial portion of student loans.

What is the fiscal impact of the ONDP post-secondary promises?

The ONDP estimates the combined cost of these promises amount to $90 million in 2015-16, $175 million in 2016-17 and $270 million in 2017-18. The ONDP would not share its background calculations for these figures but confirmed that calculations were based on data from the Council of Ontario’s Universities’ Common University Data Ontario (CUDO) database and included the cost of transfers to universities to offset for revenue lost as a result of the tuition fee freeze.

We estimate that the eliminating interest on Ontario student loans would cost the province between $30 and $36 million a year.[i]

To confirm the ONDP’s estimates, we calculated more than a dozen cost scenarios. The cost of a tuition fee freeze varies slightly, depending the estimated rate of enrollment growth and if the tuition fee estimate was based on the CUDO average across all programs, the CUDO Arts and Sciences tuition fees, or the Statistics Canada weighted average tuition fees. Under some circumstances our estimates came close to the ONDP’s--but depending on the underlying assumptions, the cost to fully offset the “lost” revenue from freezing tuition fees might be between 15% and 20% higher than what has been currently budgeted.

However, it bears mentioning that these potential cost overruns are quite small; they represent about 4% of the spending proposed by the Ontario NDP in this election, and cost less than a third of the proposal to remove the HST from off hydro bills.

What would the outcome be?  

While exceedingly modest, the ONDP’s post-secondary education proposals are an improvement over the status quo, but it is far from a perfect proposal.

Ontario’s tuition fees are at an historic high and, over the last two decades, have risen at more than twice the rate of inflation. The most recent available data indicates that 53% of the Ontario class of 2009-10 graduated with student loans, at an average debt level of $26,900.[ii]

Assuming that current tuition fee trends continue in other provinces, even with the proposed ONDP freeze, Ontario’s average tuition fees would still be highest in Canada in 2017-18 (although under the Liberal scenario they would be $990 higher). For those students who receive the 30% Off Tuition Grant, Ontario would fall from the fifth most expensive (2014-15) to the seventh most expensive province (2017-18).

To date, Newfoundland and Labrador (2009), Prince Edward Island (2012) and Nova Scotia (2014) have already eliminated interest on the provincial component of their student loans. And there is a strong case to be made that student loan interest is regressive. Those who earn lower post-education incomes and take longer to pay back their loans ultimately pay more in interest.

However, given Ontario’s need to compete in the knowledge economy, and the reality of student and household debt levels, it would be nice if we could think boldly and more long-term. Newfoundland and Labrador is a prime example of a province that has aggressively reduced tuition fees, which are now the lowest in Canada, despite a fiscal deficit. That province also plans to phase out provincial loans and replace them with grants by 2015. That’s a model worth emulating.

A tuition fee freeze certainly stops the current trend that sees Ontario students pay more than their counterparts for a university education. However, an aggressive fee rollback —perhaps one that starts with transforming the 30% Off Tuition Grant into an actual 30% universal fee rollback from which no students are excluded--would have a much more positive impact on the policy trajectory, on family incomes, on student debt loads going forward and, ultimately, on the equity and accessibility of the province’s post-secondary education system.

Erika Shaker is Director of the CCPA's Education Project. Kayle Hatt is a Research Associate with the Canadian Centre for Policy Alternatives’ National Office and was the CCPA’s 2013 Andrew Jackson Progressive Economics Intern.

[i] Based on calculations from Statistic Canada’s sophisticated Social Policy Simulation Database and Model (SPSD/M) program. However, costs would increase if market interest rates or the rates Ontario pays to service this pooled debt were to increase. Currently, Ontario students are charged prime + 1.0% interest rates for the provincial portion of their debt.

[ii]Statistics Canada, National Graduates Survey, 2013 (Class of 2009-2010).

[iii] Calculations based on Statistics Canada data (specifically the weighted average tuition fees, which is the data used in recent CCPA reports, and CANSIM Table 477-0019 Postsecondary enrolment data) produced relatively similar results.