Back to top

CAUT Bulletin Archives

January 2005

Student Aid Regime Preys on the Poor

George Soule

Income contingent repayment plans represent the single largest threat to accessible post-secondary education.

In September 2004, the majority of Canadian students were protected by a tuition fee freeze for the first time in history. This was thanks to pressure from voters in Manitoba, Ontario, Quebec and Newfoundland and Labrador.

But recently the policy debate about access to Canadian higher education has taken a bizarre and decidedly unexpected turn with the resurrection of a detested student loan program - Income Contingent Repayment.

Income-contingent loan repayment schemes for post-secondary students are old models of transferring a greater share of the cost of post-secondary education on to individuals. Devised as a way to make massive tuition fees more palatable, ICR is designed to spread loan obligations over a lifetime to lessen the immediate financial hardship on borrowers. However, extending the repayment period of student loans means those with the lowest incomes after graduation will ultimately pay more for their education as compound interest accumulates.

This scheme was widely acknowledged as so badly flawed that students hoped rejection of the ICR option in the late 1990s would close the book on the lifelong-debt-as-social-policy debate for good. They were wrong. Like a bad B-movie monster, ICR is back.

Income contingent repayment means one thing - higher tuition fees. But don't take my word for it. Consider this admission from Human Resources and Skills Development in a document obtained through the Access to Information Act: "... ICR loans would solve the problem of university and college underfunding, by allowing institutions to increase tuition fees to cover a greater portion, or even all of its costs. Fees would be unregulated and institutions would charge whatever the market would bear. Needy students and those with cash flow problems would pay the increased fees with the help of ICR loans."

Indeed, this frank and concise summary of HRSD's position eliminates the need to speculate about government "help." One way to get a better grasp of this process is to review what has happened in other countries which have experimented with ICR.

In New Zealand, during the first three years of implementation of the ICR plan in the early 1990s, tuition fees tripled and public funding for tertiary education declined by 23 per cent between 1994 and 2004. A study of the impact ICR has on disadvantaged groups found the average repayment time for ethnic minority women ranged from 24 to 33 years.

Like the Canadian government, the government of Australia has also gone on record about what ICR is meant to accomplish: "The purpose ... is to raise revenue from the recipients of higher education for return to the system as part of ... funding of higher education; it is not a form of student assistance."

Income contingent repayment and higher tuition fees will exacerbate existing social and economic divisions between Canadians. There is a direct relationship between income and borrowing - that is, those who have less must borrow more to finance a post-secondary education. This high-fees high-loan model is a debt sentence for those students who, by accident of birth, are not in a position to pay for everything up front.

In fact, the ICR principle of spreading the burden of repaying loans over a longer period of time is about taxing the poor. Students from economically disadvantaged backgrounds must borrow more, their loans will take longer to pay back (after graduation), interest will continue to accrue on their balances, and they will owe more.

All things considered, income contingent repayment plans represent the single largest threat to accessible post-secondary education in Canada. Proponents will argue that income contingent loans are about flexible options, but history tells a more accurate story. Students and faculty must resist ICR and demand that government put an emphasis on affordable education and student debt reduction, rather than lifelong repayment.

George Soule is national chairperson of the Canadian Federation of Students.

The views expressed are those of the author and not necessarily those of CAUT.