University students have lower costs and better outcomes than before

Alex Usher : The debate around post-secondary education in Canada tends to involve breathless discussions about “record” tuition or debt levels on the one hand, and tales of unemployed graduates on the other. The result is a widespread feeling that education simply isn’t worth it. But that’s wrong. Here’s why:

To begin with, costs aren’t increasing as quickly as is commonly assumed. It’s not the 1990s anymore: back then, annual increases were around 10 per cent each year and in some provinces much higher. Since 1999, tuition rises have been quite low – about 3.5 per cent, or just 2 per cent per year after inflation.

Parents have adjusted to the new situation by saving more. Last year, twenty-five per cent of full-time students took money out of a registered savings account, and the average amount they took out was over $7500. That’s well above levels seen fifteen years ago when the Canada Education Savings Grant was introduced -- and the increase in saving reduces pressure on student finances.

More importantly, students are receiving more aid than ever. Back in 1994, governments were issuing about $1.4 billion (in 2012 dollars) in scholarships, grants and tax credits. Add to that funding for First Nations through the Post-Secondary Student Support Program and institutional scholarships, and you get a total of about $2.1 billion. Fast forward to 2013 and that figure is now over $7 billion.

Not only does this $5 billion increase significantly outstrip the rise in tuition, it means that collectively, Canadian students are receiving about as much money from governments and institutions as they pay in tuition. Of course, not every student is paying zero; some (rightly) receive grant aid to cover part of their living expenses, which means that others must pay a positive sum. What it does mean is that after subsidies are included, the net cost of tuition has actually fallen over time. Could it be distributed better? Sure. But the increase in the overall generosity of the system is clear.

Increased savings and aid mean that student-loan repayment burdens are way down. Student debt seems to have stopped growing and may even have decreased slightly. But two other things have also happened: the first is that student-loan interest rates have fallen from around 10 per cent in the mid-1990s to about 5 per cent today, and the second is that taxes on incomes in the 40-50K range (i.e. what recent graduates tend to make) are down by about a quarter. That means that even though graduate incomes haven’t risen much in the past decade, the percentage of after-tax income the average new grad needs to pay to service their loan has fallen from 12 per cent to 8 per cent. For young people starting out on their careers, that’s a big improvement. And if they run into problem, the Canada Student Loans Program’s Repayment Assistance Plan is the most generous borrower-assistance program the country has ever had.

So, over the past 15 years or so, average net costs have fallen, debt burdens have fallen, and protection for low-income borrowers in repayment has improved. No doubt this has contributed to the explosion in participation rates. Since 1999, the percentage of Canadian 18-21 years olds attending university has shot up from 19 per cent to 30 per cent. So much for the scare-story that costs are keeping education out of reach.

And the benefits? Well, despite all the talk about BA graduates not getting jobs, an analysis of provincial graduate surveys shows that while employment rates have fallen by a couple of points since 2008 (same as everyone else), they remain almost without exception over 90 per cent, same as they have always been. Indeed, contrary to the snide claims that the country needs more welders and fewer BAs (claims usually accompanied with intimations that the BAs are inevitably going to be baristas), in British Columbia unemployment rates among recent Arts grads are exactly the same as they are among recent apprenticeship completers (9 per cent in both cases). And that’s just in the short term. Over the longer term, measured five years out or more, the returns to higher education remain very high

In sum, things are as good or better as they have been at any time in the last twenty years. Or maybe even longer: back in the 1970s, tuition was cheaper, but university graduates actually earned less than community-college grads.

One could make a more solid case that things are not as good as they were in the 1960s, but it’s a dubious comparison. If you were a student in both periods, you’d no doubt notice the difference, but now we are giving the benefits of higher education – and the high-paying jobs associated with one -- to a lot more people. For three quarters of the current student body, the fact that education might be more expensive than 50 years ago is irrelevant – they wouldn’t have had the chance to study back then. And an education with a debt is a lot better than no education at all.

None of this is to say that life is hunky-dory for today’s students. Getting through post-secondary and starting a career is a tough slog. But it’s getting better, not worse.