Free tuition is no magic bullet

Post-secondary education fees are not the major barrier to participation they are made out to be

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By Jeff Collins
and Ben Eisen
Atlantic Institute for Market Studies

HALIFAX, NS, Jan 13, 2015/ Troy Media/ – Eliminating tuition fees for university students is a wasteful and inefficient policy idea. Students themselves share in the benefits of higher education through increased lifetime earnings and it is reasonable that they should also share some of the costs.

Recently, the government of Lower Saxony (a German state) decided to abolish tuition fees and make Germany a tuition-free country once again. Free tuition-supporters in this country have noticed this development and are now asking, “Why not Canada?”

Claims made for free tuition don’t stand up to scrutiny

For example, the Nova Scotia branch of the Canadian Federation of Students (CFS) published a report in September 2014 calling for the elimination of all provincial university tuition fees by 2026. CFS regional chairperson Anna Dubinski says that student debt hinders the province’s economy by deterring people from attending post-secondary institutions. The CFS argues that abolishing tuition fees would lead to greater participation in post-secondary education at little overall cost to the provincial treasury.

free tuition
Higher tuition rates are not a barrier to participation for low-income families

These claims do not stand up to scrutiny. On the issue of post-secondary enrolment, there is no positive correlation in Canada between provinces that have lower tuition levels and those that have higher rates of post-secondary participation. For example, Quebec and Newfoundland and Labrador – the two provinces with the lowest tuition in the country – both have lower post-secondary participation rates than some provinces with much higher tuition rates, such as Ontario and Nova Scotia.

Proponents of zero tuition sometimes argue that higher tuition rates create a barrier for participation for low-income families. But a 2011 study from the Frontier Centre for Public Policy showed that university participation rates for low-income families are generally no higher in provinces where tuition is cheapest than in the higher tuition provinces. That paper showed that Nova Scotia and Ontario, two relatively high tuition provinces, boasted the highest university participation rates in Canada for young adults from low-income families.

This evidence suggests that post-secondary education fees are not the major barrier they are made out to be by activists for zero tuition. Of course, at a certain point, very high tuition fees would restrict access for low-income families. There is significant evidence, for example, that tuition rates in the United States, which have on average climbed by over 400 per cent since 1982, are a barrier to participation. However there is little evidence, especially with the availability of grants and scholarships for low-income families, that we are approaching that point in any Canadian province.

Tuition rates are highly subsidized in all Canadian provinces, which means that the price of a university education is a bargain for qualified students in both high- and low-tuition jurisdictions. The existing subsidies, combined with scholarship opportunities and low-interest loans, are sufficient in higher-tuition provinces to incentivize most qualified prospective students to attend. So there is little to no additional benefit in terms of participation associated with using taxpayer dollars to drive tuition fees closer and closer to zero.

Ross Finnie, co-author of a recent study on post-secondary participation rates in high-tuition Ontario, has stated that the existing subsidies and financial aid options “by and large ensures accessibility for those who would otherwise face financial burdens.” The same is true in other higher-tuition Canadian provinces.

Canada’s model better than Germany’s free tuition model

The German experience with free tuition also raises complicated economic issues ignored by free tuition proponents. As education expert Alex Usher notes, Germany’s tuition-free universities are made possible in part by basing professor salaries at 60 per cent of the Canadian average. Furthermore, Germany’s post-secondary participation rates are considerably lower than Canada’s. This means that while the per-student subsidies may be sufficient to cover all tuition fees in Germany, those subsidies reach a narrower base of individuals, and a smaller number of students actually participate in higher education than is the case under the shared-cost Canadian system. Broad participation in higher education is important for long-term human capital development, and on this score Canada’s model is faring better than Germany’s zero-tuition approach.

The benefits of higher education are shared between students and the larger societies in which they will live and work, and so the costs should be as well. Higher education is a worthwhile investment for both governments and students. The current shared-cost approach is therefore a reasonable compromise, and governments should reject calls from interest groups to move towards a zero-tuition policy structure.

Jeff Collins is a research associate and Ben Eisen is the director of research with the Atlantic Institute for Market Studies (aims.ca)

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