Access and Financial Sustainability Key Challenges for New Tuition Policy Framework

Although Ontario enjoys the highest postsecondary participation rate in Canada, financial and non-financial barriers are preventing some students from pursuing college or university, according to a report by the Higher Education Quality Council of Ontario…

Toronto, March 14, 2011 – Although Ontario enjoys the highest postsecondary participation rate in Canada, financial and non-financial barriers are preventing some students from pursuing college or university, according to a report by the Higher Education Quality Council of Ontario (HEQCO).

With the current tuition policy framework for Ontario’s colleges and universities set to expire in 2012-2013, the report Tuition Fee Policy Options for Ontario is intended to inform the discussion on what the new framework might look like. 

In addition to improving access for groups traditionally under-represented in postsecondary education (PSE), a second challenge is ensuring the financial sustainability of the system – striking the balance between tuition fees, financial assistance and the revenue needs of colleges and universities to ensure the maintenance of a high quality system. “Setting a new fee policy requires a full appreciation of the complex interplay among these three factors,” says Ken Norrie, HEQCO’s vice president, research and co-author of the report.

In summarizing existing data and extensive research on the postsecondary system, the report also dispels a few sacred notions that often fuel the debate on tuition levels. 

While tuition fees for Ontario colleges and universities have increased since the early 1990s and rank among the highest in Canada, participation rates have also increased.  “To date, studies have not shown a significant relationship between tuition fees and either participation rates or graduation rates,” says the report, which attributes the brisk enrolment numbers, in part, to growing awareness of higher education’s well documented economic benefits.

Further, many students never pay the full sticker price.  The report notes that the availability of government grants and tax credits, coupled with donor-based scholarships and other financial support, have had a significant impact on the costs students actually incur.  “In effect, nominal tuition fee increases between 1999-2000 and 2007-2008 have been almost completely offset by the combined effects of education tax credits and inflation,” says the report.

In addition, the number of students receiving financial assistance through The Ontario Student Assistance Program (OSAP) has increased markedly over the last decade, with the number of awards climbing from 80,000 to 140,000 over the period.  And since 2004, OSAP default rates have been declining.

But many Ontario students who might benefit from the province’s student financial assistance programs do not apply. HEQCO research found that only 50 per cent of lowest income full-time university students applied to OSAP in 2007-2008 and the situation is even more pronounced for colleges, where a mere 30 per cent of full-time, low-income students applied.

Some students are unaware of financial aid programs or may have difficulty understanding how to access them, and the province is responding by trying to make OSAP more transparent and user friendly.  However, the report notes there are also non-financial barriers, and they are causing some students to not even consider PSE as an option, particularly Aboriginal and low-income students, those whose parents have no PSE, and students with disabilities. 

Previous HEQCO research has identified parental education as a key influencer, where having no family history of college or university poses a significant obstacle to higher education. Some students don’t understand the real costs and benefits of PSE while for others, the chances of making a successful transition to college or university are considerably reduced because of decisions made well before they reached high school. For such students, says the report, a completely different policy toolkit is required to address these complex social and cultural factors.

The pros and cons of four tuition policy framework options are discussed but not ranked in the report: capped tuition fees, government/student shares, constrained deregulation and full deregulation.  All are evaluated in the context of accessibility, institutional revenue needs and public funds available.

  • The fee cap approach explores several variations including rollback, freeze, tying increases to the Consumer Price Index and the current government policy that allows an annual increase of 5 per cent in average tuition fees. The report acknowledges that each variation will have its impact, detractors and supporters.
  • The shares approach explores the appropriate balance between the relative cost of PSE that should be borne by tuition versus the government. While the report says that any target ratio is arbitrary, it notes that the student share has increased over time. The share of revenue provided by university tuition, for example, has increased from 19 per cent to 37 percent over the last 20 years – with the lion’s share of growth between 1990 and 2000 and accompanied by a series of policy adjustments such as tuition credits.
  • Constrained deregulation would give institutions more discretion in setting fees within and among programs while retaining an overall fee cap.  The Ontario precedent for this approach was set in 1998, when tuition was deregulated for certain programs that were assumed to provide graduates with higher earnings and employment rates.
  • Full deregulation would allow discretion in setting fees and remove an overall fee cap. While attractive from an institutional revenue standpoint, the approach could have a negative impact on accessibility, although any option that results in higher fees could include a “tax back” scheme where a portion of increases would be set aside for financial aid.

In tandem with tuition policy, the report explores various approaches to financial assistance, noting that Ontario’s financial aid programs already have many income-contingent features where loan repayment is tied to income after graduation.  Educational loan programs in Australia are cited for their automatic implementation of income contingent repayment, as compared to a more “special terms” approach in Ontario where students must periodically apply and negotiate for debt relief as their circumstances dictate.

As the province grapples with the development of a new tuition fee policy, the HEQCO report cautions that there are no obvious benchmarks for setting a new policy and that the choice must be consistent with and advance the province’s broader economic and social objectives.

About the Higher Education Quality Council of Ontario

The Higher Education Quality Council of Ontario is an arm’s-length agency of the Government of Ontario dedicated to ensuring the continued improvement of the postsecondary education system in Ontario.  The Council was created through the Higher Education Quality Council of Ontario Act, 2005. It is mandated to conduct research, evaluate the postsecondary education system, and provide policy recommendations to the Minister of Training, Colleges and Universities with a view to enhance the quality, access, and accountability of Ontario’s higher education system.

For further information, please contact:

Susan Bloch-Nevitte
Executive Director, Communications
Higher Education Quality Council of Ontario
(416) 212-5242