The out-of-control university tuition hoax: Duncan Hood

Cost not as high as you think

Protesters opposing Quebec student tuition fee hikes demonstrate in Montreal, August 22, 2012 (Photo: Graham Hughes/CP)

Protesters opposing Quebec student tuition fee hikes demonstrate in Montreal, August 22, 2012 (Photo: Graham Hughes/CP)

Back when I went to university in the early 1990s, I had it rough. At least I thought I did. I’d complain bitterly to my dad about the soaring cost of tuition, which was closing in on $2,000 a year. My dad, as I knew full well, didn’t have to pay a cent for his education. He grew up in Britain, and when he went to school, university was free.

Now I’m an adult, and lately I’ve been getting concerned about the next generation. The tuition I paid looks like a bargain now. A report recently published by the Canadian Centre for Policy Alternatives (CCPA) showed tuition levels reaching an astounding $6,610 a year—about triple what I paid in 1990, after inflation.

But when I did some research into the matter, I discovered that the university tuition crisis is a hoax: for most Canadian students, inflation-adjusted tuitions haven’t gone up at all. For example, in Ontario the majority of undergraduates are now effectively paying less tuition than they have been in a decade. Shockingly, a full third of Ontario students aren’t paying anywhere close to the $6,610 figure cited by the CCPA—they’re paying even less than I was. After tax breaks, scholarships and grants, they’re forking out only $1,000 a year.

It turns out that over the past 20 years, we haven’t seen a drastic increase in tuition costs, but rather a shift to a new rebate model. It’s true that the sticker price for tuition has shot up dramatically, but so have the tax credits, grants and scholarships awarded in Canada. The net effect is that those students who exhibit greater academic potential and those who need financial assistance are paying the same as, or in some cases less than students back in the 1990s.

Figures from Alex Usher, president of Higher Education Strategy Associates, help to illuminate what’s going on. He notes that while universities have been crying poor for some time, the truth is that between 1992 and 2010, total inflation-adjusted per-student university funding in Canada has steadily risen, from about $24,000 to $33,000.

So why have tuitions been rising? In short because university expenditures have also shot up. There are lots of different reasons for this, but one of the more interesting ones is scholarships. It turns out that since 1992, expenditures on scholarships have risen more than sevenfold. So yes, tuitions have tripled, but scholarship spending went up by seven times. Add in a slew of grants such as the Ontario Tuition Grant, which is available to all students with a family income under $160,000, and you quickly realize that almost no one is actually paying the sticker price.

Economists such as Carleton University professor Frances Woolley note that we’ve moved to this rebate system because everyone wins: well-off students with mediocre grades (who wouldn’t have gotten into university at all back when I went) are now effectively subsidizing the smart kids and the ones who need financial aid. This takes some of the burden off the government funding, and still allows universities to grow and admit more students every year.

Once you understand what’s actually happening with university tuitions, it’s tough to fret over the cost. Universities are better funded than they’ve ever been, allowing them to put more dollars into the research and development we need to improve Canada’s productivity. So the next time you see student leaders marching in the streets to protest out-of-control tuitions, don’t fall for it. Most of them aren’t paying any more than you did.

Get our daily briefing on innovation, leadership, technology & the economy.
Weekdays at 6 AM ET. Learn More »

8 comments on “The out-of-control university tuition hoax: Duncan Hood

  1. Pingback: Roundup: Del Mastro facing charges | Routine Proceedings

  2. There is no doubt that the tuition story is more complicated than it appears on the surface. The outcome in terms of eventual student loan burdens is a product of tuition fees, scholarships, grants, savings, and students’ own choices about where to study. However (and this is a big however) the dismissive tone of this article and the selective, weak introduction of facts to support the authors argument are… well just silly. “Hoax” is an irresponsible overstatement, as is the assertion that “almost no one is actually paying the sticker price.” The math on the increase in tuition for versus increased expenditures on scholarships is not even presented. I mean I don’t mind healthy debate on matters of public policy, but this kind of simplistic thinking doesn’t get anyone anywhere.

  3. This is partially true. Good news for students graduating now and going straight from high school to university. But when I went to uni 10 years ago, the tuition was similarly priced at $5,000 ($5,500 with fees), and the scholarships were still where they were in the 90s. With a 94% high school average and working class parents I got about $500 per year. OSAP gave me another $3-4K and my parents gave me another $2K. Who knows where the government figured I was supposed to get the other $6K per year. If I worked they subtracted it from my loan. So I basically took on a huge pile of debt. My debt essentially prevented me from going on to grad school in medical research.

    Fast forward a decade an a BSc in life sci is not at all that useful in Canada when our pharma industry is shrinking, and PhDs and even MDs have trouble finding working, despite all the advice from teachers and journalists that a science degree was a ticket to the high life. I’m considering going back to school to become an engineer. The problem is that engineering tuition is now deregulated, and it costs $10K. If you’re coming out of high school you can usually make a dent in that with scholarships, bursaries, and grants, but as a mature student who currently works full time, I won’t be eligible for the scholarships and my current sustenance wage makes me ineligible for OSAP. Maybe I can remortgage my brain debt and double down on the iron ring?

  4. Pingback: Professor Woolley comments on tuition rebates - Department of Economics

  5. Pingback: Professor Frances Woolley comments on tuition rebates - Department of Economics

  6. I want to start a blog on myyearbook but i cant come across the box on my profile.. We have made sure we have checked the box to show my latest blog in the manage profile boxes section.. But it really still wont show up.. Please help.. Is there any other way to star…