For Ontario’s low- and middle-income families, paying for university involves priority roulette

August 31, 2011

This fall, as young people make preparations to enter university, some Ontarians may be feeling nostalgic.

But for many Ontario parents, the excitement and pride that comes with watching their child take this important step is tempered by the growing and often untenable financial burden it also represents.

While discussions about financing higher education almost exclusively focus on the student (who is not only the recipient of the degree but also the bearer of some of the debt), families are also implicated in the discussion. Because they know the benefits of higher education are both personal and intellectual but also financial, families do what they can to help children pay for their education and try to spare them the burden of debt upon graduation.

But Ontario families are under increasing financial pressure.

Since 1990, Ontario households have endured stagnant incomes and rising levels of household debt (from 90% of disposable income 20 years ago to 150% today). But a post-secondary degree introduces a third factor: since 1990, tuition fees have seen a real increase of 244%. This fall, average undergraduate tuition fees in Ontario are the highest in the country at $6,500.

In practical terms, this means that households have to work much longer than they did in 1990 to make up the cost of their child’s tuition fees for a four-year degree. For example, it would take a middle-income family in 1990 from September 1 to November 27 (87 days) to earn the equivalent of four years of tuition fees—if they were able to suspend mortgage payments and other household expenses and dedicate every cent they made to their child’s education. But that same family in the fall of 2011 would have to work from September 1 to March 14 (195 days) to pay for a degree’s worth of tuition fees.

The increased burden is staggering for low income families: in 1990 a low-income household would have had to work for 270 days (ignoring all other expenditures) to earn the equivalent of four years of tuition fees; in 2011 this increases to 673 days—almost two years of household income.

For professional programs like medicine or law, it may take a year or more of earnings for a middle-income household to pay just the equivalent of tuition fees. This has implications for all Ontarians: debt loads of $80,000 - $100,000 can be a powerful incentive for graduates to rethink their career specialization, prioritizing quick debt repayment over societal need. When Ontario desperately needs family doctors, this discussion takes on an even more critical dimension.

Families, already drowning in debt, are having to make difficult choices around the kitchen table about what to prioritize: meeting basic expenses, saving for retirement, paying down their debt or sending their kids to university. And even after households engage in a zero sum game of priority roulette which hits low- and middle-income families hardest, many students upon graduation are left with additional student debt.

Rather than focusing on stop-gap measures that provide minor assistance while still requiring families to take on debt, the tuition fee burden must be addressed upfront in order to remove this significant barrier to access.

There are alternatives to increased downloading onto families. The government of Ontario can maximize investment benefits and create a highly educated populace not overburdened with debt, and in so doing help ensure that university is affordable to students and their families regardless of income.

The 2009 Ontario corporate tax cuts cost an estimated $1.6 billion for fiscal year 2011–12. Rolling back undergraduate university tuition rates to 1990 levels (adjusted for inflation and a growing student population) only costs $1.5 billion for the same year.

If Ontarians prefer to pay for lower university tuition fees in slightly higher income taxes, for just $100 a year for the average family, fees could be reduced to 1990 levels. For an average of $170 a year, undergraduate tuition fees in Ontario could be eliminated.

Since 1990, the system of financing higher education has become more regressive, exploiting already over-stretched families who want to help their children pursue their educational aspirations. By forcing all but the wealthiest families to play priority roulette, assume still more debt, or make the difficult decision that higher education is too great a financial burden to bear, Ontario is hampering its economic and educational potential, and we are all paying the price.

David MacDonald and Erika Shaker co-authored Under Pressure: The impact of rising tuition fees on Ontario families by the Canadian Centre for Policy Alternatives.