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Putting an end to the student debt sentence

Student debt forgiveness has sparked hope in the U.S. Canada should pay attention.

September 8, 2022

6-minute read

U.S. President Joe Biden’s administration recently announced a long-awaited student loan forgiveness plan, reigniting the debate in Canada about how, and how much, we (should) invest in post-secondary education.

Significantly, while the initial response in the U.S. focused on who would benefit from loan forgiveness, the discussion has broadened to include what’s driving debt—the high cost of tuition. And it makes sense. If we’re going to address where we’re at, we need to understand how we got here.

In the mid-1990s, Canada’s federal transfer mechanism for funding higher education changed, but it also meant less money going towards universities and colleges from the federal government.

As a result, we began to see variations between the level of financial support on the part of provincial and federal governments and the degree to which costs were downloaded onto students and their families as part of a user-fee model.

This meant students in some provinces paid significantly less than those in others. As the user-fee system became more entrenched, even more tiers of payment were introduced: deregulation for international students and for some programs, higher fees for out-of-province students, additional, and largely unregulated, compulsory fees above and beyond tuition fees.

And while there are some notable—though temporary—exceptions, on the whole, fees have continued to rise across the board.

At the other end, students who cannot pay the entirety of the cost of their education up front graduate with significant debt as fees generally continue to rise throughout the duration of their program. Unfortunately, the preferred method of dealing with debt tends to be targeted grants, loans or implementing a repayment threshold. While debt forgiveness does provide relief for some students, other initiatives are more about extending or postponing repayment, which only delays the problem and doesn’t solve it—certainly not in a comprehensive way.

While provinces and the federal government have a range of student assistance programs, they are largely after the fact, complex, and hard to navigate. They can also change mid-degree, which is particularly challenging for students who may have made their choice of institution based on assumed debt forgiveness upon graduation only to find that the program has changed or no longer exists, although their debt still does.

Given this policy context—and the immediate context of the new school year and today’s new tuition fee data from Statistics Canada—what should we know about costs, debt, forgiveness and investment in higher education?

Because these are undergraduate averages, they do not indicate whether there are different fees for in-province and out-of-province students (Newfoundland and Labrador, Quebec, Nova Scotia and others) and what those often significantly higher costs are. They do not reflect the range of different fees for certain programs (professional programs have significantly higher fees—an average of over $23,000 for dentistry, and over $15,000 for medicine). Other undergraduate programs, like engineering and management, also have fees that are higher than the national average. And none of these tuition fees include additional compulsory fees, which are, on average, $1,000 a year. For 2022-23, Alberta’s additional compulsory fees for undergraduate students are almost $1,300.

And while we understandably focus on tuition fees, they are by no means the whole story. It’s not abnormal for costs to reach $20,000 each year for students not living at home.

What are the effects of debt?

There are immediate impacts: debt means less disposable income, which directly affects local economies. It impacts whether or when you can make major life decisions, including buying a home or a vehicle, or starting a family.

It also means that in order to begin making repayments, new graduates may find themselves taking whatever job they can find, or multiple jobs, which speaks to the cycle of precarity that so many people find themselves trapped in. And this can have implications for wage scarring, the health and well-being of workers, and broader community cohesiveness.

Student debt can also mean declaring bankruptcy. In 2018, more than one out of six Ontarians who declared insolvency indicated student loans played a part (this translates to 22,000 former students declaring bankruptcy across Canada in 2018 alone).

What would reducing or eliminating student debt solve?

Student debt is the result of a user pay model that has shifted the responsibility of paying for the next generation’s education from the public to students and their families—a model that disproportionately disadvantages students from historically marginalized communities.

Since governments used to invest far more public dollars into post-secondary education, previous generations of graduates benefited from our tax contributions alleviating the crushing cost of getting a degree. Now we’ve downloaded more of that responsibility onto this generation of students. There’s a better way.

Forgiving debt would be the first step in acknowledging the abject failure of a payment model that has at least half of students worried that they will not be able to afford next year’s tuition. The source of the problem must also be addressed: almost without exception, tuition fees and other user fees continue to increase.

But given the broader context of inequality, a program that forgives only a portion of the debt won’t eliminate the burden. It will for those who have less debt, but it will only reduce it for those students who already have less financial security. Any relief programs have to keep this context in mind.

Debt forgiveness, done correctly, is a big step towards making higher education more accessible. But it’s the first step. The question can’t be “what’s the least we must do?—it’s “what’s the best we can do?”

But is this practical?

Federal investment in programs, like the Canadian Emergency Relief Benefit (CERB), provided a timely reminder of what governments are capable of, and what quick action can do to transform and even save peoples’ lives.

We’re talking about transferring debt from students and their families to the federal government, which is in a much better position to deal with because it has more levers at its disposal to raise sufficient revenue to do this in a progressive manner while helping to address the issue of affordability.

Is the government in a position to address debt forgiveness? The Parliamentary Budget Officer (PBO) determined in one analysis that to forgive debt for a sizable number of students and eliminate tuition fees would cost $16 billion in the first year, and about $10 billion in subsequent years. That’s not insignificant. But you know what? A modest wealth tax of 1-3% on the very richest Canadians could net $28 billion in year one and $363 billion over a decade.

Isn’t debt forgiveness unfair to those who already paid off their loans?

That really is the perfect argument against progress. Social programs were created because people wanted something better for their children and grandchildren than they themselves had. Would we make the same argument about public health care, for example, or pensions, or other life-changing policies or discoveries?

We’ve normalized the idea that we collectively, through our governments, can only err on the side of doing less for each other. But as Bruce Cockburn reminded us, the trouble with normal is it always gets worse.

When we’re talking about loan forgiveness, we’re not talking about “not paying.” We’re talking about changing the repayment method and plan. Graduates already pay back the cost of their education over the course of their careers in enhanced salaries and higher taxes, not to mention other contributions they make to society as a result of the education they’ve acquired.

Imagine how much more efficient it would be if, instead of having to cobble together a living with multiple jobs for the first few years after graduation to repay debts privately, students could focus on really putting their education to use and to our collective societal betterment. And that’s something everyone benefits from—even those who’ve paid off their student loans.

A comprehensive solution

Debt forgiveness, done correctly, is a big step towards making higher education more accessible for everyone. But it’s the first step. Addressing accumulated student debt is a key aspect of eliminating the economic and social drag that saddles students and communities. But the second step is to move away from the existing user-fee model in a comprehensive manner—not the piecemeal approach we’re currently following.

Societal improvements are about choices—deciding what we want to prioritize, and then deciding the fairest, most equitable, effective and efficient way to make it happen. It’s high time we recognized the need to increase our investment in postsecondary education – the people who provide it, the institutions that facilitate it, and the future generations who put it to good use – ours and theirs.

When it comes to the health and wellbeing of current and future generations, the question can’t be “what’s the least we must do? It’s “what’s the best we can do?”

Additional source for table "Average undergraduate tuition fees for Canadian full time students": Statscan Table: 37-10-0036-01 (formerly CANSIM 477-0068)

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