Monday, April 18, 2016


So, after a few hours of shared celebration, the government’s new tuition proposal has become controversial. You know the basics by now.  The government announced it would be providing free tuition for those whose family income is $60,000 or less. Then, as news came out more slowly of other programs cut to pay for it, a debate arose over whether or not it was worth it.

There's nothing I enjoy than a good policy argument. And, like Sheldon Cooper says, I'd like to do the math. So I reviewed the government’s plan and found the real numbers – and a few surprises.  To help the debate over the good and the bad, let me share some numbers with you.

All the education, just one calorie of debt? Let's do the math on the TAB.

One important thing to note is that this is a little more complicated than the government simply paying tuition for everyone whose income is under $60,000. The tell is this – the government estimated that 7,200 New Brunswick students would get the Tuition Access Bursary, or “TAB”.. Since the median tuition fee is just under $6,000, that would be a $42Million program. Yet the government costing is $25million for the program.  So, what explains the difference?

There are two wrinkles here.

1. To provide “free” tuition, the government will first claw back the federal bursary for low and middle income students.  Because they fund only the difference, it is not quite a full tuition bursary. 
2. Hundreds of low income New Brunswickers already had “free tuition” by the definition of the program, and so there is no new money spent on them.

Free Tuition – A Little Surprise

Just so we are clear, we already had free tuition for low-income New Brunswickers.  Many other provinces do to, if we use the definition in this program. 

Of course, tuition is not free in New Brunswick for anyone. Students pay their tuition fees as always. What the government defines as free tuition is that students now receive a non-repayable grant (or bursary, if you like) which is worth what they have to pay in tuition.

Calling this free tuition is not a problem, in my book.  It isn't free tuition the way Bernie Sanders means it, where PSE is like the K-12 system, where we all enrol without user fees and pay for it through taxes. But if Brian Gallant told me to go buy a car and he'd send me a cheque for the cost, and I didn't have to pay him back, I'd let him claim he gave me a free car. 

However, if what we mean by free tuition is government grants equal or greater to tuition, we had that. 

Here's why. 

Each year many students qualify for maximum student aid. The government operates student aid this way. They figure out how much money you need to pay tuition and live during the school year they figure out how much money you should have between your earnings and the money you should get from family. Then they give you the difference. They first give you loans -- $350 per week of study, or $12,600 for a 36 week programme. If after you've borrowed the maximum, you still have need, there's a New Brunswick Bursary of $130 per week, or another $4,680 that you don't have to pay back. 

There's also a federal bursary if you are low or middle income by their standards (which is based on the size of your family, but generally the cutoff is between $40,000 and $85,000 of pretax income. If you are in that group, there will be between $1,000 and $2,500 of bursary from the federal government as well. 

That's how it worked before the New Brunswick government made their announcement. Did you catch why we already have free tuition?

As you can see, if you maxed out your student aid because you had high need and little money, you already get $6,700 of bursaries.  Unless you go to Mount Allison, tuition fees at colleges and universities are less than that. So low-income students already had bursaries equal to their tuition fees. That's what we are now calling free tuition, so we need to note that it existed already.

The number of students who already had free tuition is not inconsiderable. Studies show 18% of New Brunswick’s roughly 13,800 student aid recipients maxed out their bursary and still had some unmet need, so that means 2,760 students. Of the remainder, a number of others still got bursaries, and if this larger group averages $687 of bursary, that likely means the lowest-income among them got most or all of their bursary. Therefore, in a typical year, about 3,000 New Brunswickers were already getting free tuition. 

That is important, because of the cuts to other programs are meant to target resources to the lowest-income New Brunswickers, there is a logical contradiction here. The lowest income borrowers share equally in the cuts, and so if they didn't gain anything the only change is a negative one. 

For the highest-need (and presumably lowest income) students, they gained nothing with government’s announcement.  After all, the fact that the Tuition Access Bursary (as they are calling it) is targeted at low-income New Brunswickers means little, because the people receiving full bursaries were by definition low income. For them, their bursary got a new name. They may even lose a bit, because the tax credits that got cut to pay for it were universal, and at the very low end, it's unclear if the Tuition Access Bursary has replaced their slightly-more-lucrative New Brunswick Bursaries. As well (and this is important), the New Brunswick government is not giving them a bursary for the amount of tuition, but for the difference between the federal bursaries and tuition.  So, the New Brunswick government does claw back your federal bursary in order to pay for your “free” tuition. 

(This group will include a few more “partial” winners, because a slightly smaller cohort would have received some bursary award to meet their need, but less than the full amount.  Because the new Tuition Access Bursary appears to be all-or-nothing, in that it covers you to your tuition fee if you're covered, they will get a smaller boost. Judging by the costing, this doesn't greatly alter the framework of this analysis, but I should note their presence).

In fact, we've had even more far-reaching free tuition programs before. The Millenium Bursaries and Timely Completion Grants of the Graham government, given tuition fees at the time, were also free tuition grants by the Gallant government’s definition. And yes, Tories can argue that the cancelled Tuition Tax Credits were free tuition programming as well.  If you maxed out your bursary while in school and claimed all your tax credits after, you would have had more money from government than you paid in tuition. They don't keep numbers on how often those two things overlap, so we can't tell how many people got free tuition, but some likely exist. 

By the new definition, meet the first premier to deliver free tuition. Surprised me too.

So, to summarize, for 3,000 low-income New Brunswickers, this is a new name on the same help—and tuition was already free. 

So, What Changed?

That isn't to say that nothing happened last week.  Some students will definitely benefit from what government did. The government estimates that 7,200 students will benefit from the new Tuition Access Bursary. That's likely true, and here's who they are. 

There were a number of students who have family incomes below $60,000 but did not get a bursary. For them, after summer jobs and family contributions, their financial needs could be met by that $350/week of loans they could borrow, and under the old rules, you don't get a New Brunswick bursary until you max out your loans. 

The new Tuition Access Bursary goes on the front end, and since this group wasn't qualifying for maximum aid before, we can assume many will be getting the smaller middle-class federal bursary.  They still have to contribute their modest federal bursary, but if their family income is under $60,000 , they probably get about $5,000  in bursary that used to be a loan, and that will make you happy. (If you go to Mount A, that's over $6,000 in bursary. If you're the person who eats only crab legs and prime rib on the buffet because you want to make the house pay, consider Sackville).

One reason I suspect this is the cohort the government has in mind is that if the program helps 7200 students, there were 3,000 who already got the same help, so there's no new money there. Giving 4,200  students bursary help of roughly $5,000  gets you to a number pretty close to the $20-25million government says they'll spend. 

So, there are your winners in last weeks announcement. If you want numbers, roughly 4,200 of New Brunswick’s 29,000 students have a new bursary of between $4,500 and $5,500. That's about 16% of students. 

But this premier brought in free tuition too.  They have that in common. 

Who Loses?

It has to be said that the net result of moving all this money around is that government is spending less to support students than was the case under the Alward government. In their first budget, the cancellation of the Tuition Tax Credit cut $22 million from student debt reduction. And the cancellation of the Education and Tuition Tax Credits takes another $11 million away. Government has alternately said each program was cut to fund more targeted assistance. Assuming this is it, they didn't return all the money. 

To quantify, each student (including low income students) lost about $560 with the loss of the federal Tuition and Education Non-Refundable Tax Credits. The slightly less-valuable provincial version is likely about a $400 hit to each student. That's 30,000 small losses.

The Tuition Tax Credit was worth up to $2,000 per year, but only students who stayed in New Brunswick benefitted. How many was that?  The Canada Student Loan annual report generally shows about 11,000 students still in student loan repayment in New Brunswick. Extrapolating that time period to tax credit eligibility (about half of the student loan repayers would be in that window, and about half of graduates have loans to repay) would land you pretty close to government’s estimated cost of $22million to offer the credit, or 11,000 people losing out on $2,000.

So, let's sum up who is up and who is down. 

About 11% of students, the very lowest income, get the same bursary they had before but lose a tax credit. They may or may not have also lost the value of their federal bursary, depending on the answer to this question -- has the New Brunswick Bursary been rolled into the TAB, or does it still exist after student has been awarded the TAB and a full student loan?

Another 16% of students lose a small tax credit and gain a bursary 10 times larger, which is a definite win, and a significant number of students. 

The other 73% of students lose a $400 tax credit and get no new help.

Of the 84% of students who don't get new help from this announcement, about 60% of them will lose a tax credit after graduation worth $2,000 per year. 

Is It Worth It?

Cynics will say that the government has rebranded an existing bursary as “free tuition” and added a few new recipients to help the bigger cuts slide by.  And, I'm sure, this public relations advantage was discussed. 

However, the new program isn't just a triumph of political branding. Studies have shown lower income students tend to be more affected by risk and uncertainty when deciding whether or not to go to school. The old programmes were less certain and, as the New Brunswick Student Alliance correctly notes, often only offered rewards in a longer window than when students are actually deciding to attend school. Making a simple pitch –if you're income is this, you get this help—has a positive public policy component to it that can't be dismissed just because it is somewhat helpful to the political messaging too. 

STU's scholarship guarantee is now widely imitated. Because certainty matters in PSE.

On the flip side, the sum total is to favour new students over recent graduates. The Tuition Tax Credit was a retention tool to help keep young families in New Brunswick even if our wages are lower. High debt loads push people out of the province.  If the graduates of 2020 leave on large numbers, we may have punished young workers who chose to stay in order to train a new crop of grads who will work elsewhere. The best-case scenario is that students who study here to get the new bursary have roots here that help -- it is too soon to tell. 

The government also needs to provide more concrete answers about its new Education and New Economy Fund, which is the fund that provides funding for the new TAB. This is unusual, because instead of building the money into the budget of the Department that administers student aid, the funding is coming from this new Fund which only has three years of funding commitments. Because the cuts to other programs were permanent, this is a curious decision which is hard to evaluate because basic questions of the ENE Fund governance are still unanswered. At the very least, students embarking on a four year degree should be told if the funding is only guaranteed for three.

The loss of the tax credit does impact mid-career and part-time students who try to upgrade their skills. Whether the financial impact is enough to matter, or whether it is mitigated by new programmes, is still unknown. 

In the end, government asked 41,000 New Brunswickers to take a cut of between $400 and $2,400, so that 4,200 New Brunswickers can get a new $5,000 bursary. Where they used to get a $5,000 loan.  The debate will now go on over whether that trade off is fair, and if it will improve access. 

But I will bet if they phrased it that way, it wouldn't have gotten as much traction as suggesting it is a new “free tuition” program. Now, with the right numbers behind the labels, let the debate proceed. 

Author's Edit: My friend Alex Usher of Higher Education Associates, weighed in yesterday with a number of points of agreement but one challenge to my use of "lowest income" to describe those who were already maxing out their bursaries and thus, already getting "free tuition". He notes that while being very low income is one way to have far fewer resources than needs and thus get a maximum award, these students are (in his considerable research) more likely to live at home and thus have lower assessed need. He suggests that these students may be "independent students"...those who meet the definition of having been out of high school for four years and thus free from parental contribution requirements. 

Now, this speaks to the identity of that group and not the fact that "free tuition" was a reality for them. And it then raises the question of whether a 22 year old with a low income but from a better off family should be called "low income" (since they still may have more in common with groups who traditionally have high participation rates). It doesn't change the points here of the size of groups who benefit or don't. But it is an important dimension to debating the policy outcome, and with thanks to Alex I note it here. 

1 comment:

  1. The old Tuition tax credit was worth up to $4000 a year, not $2000.