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CAUT Bulletin Archives

March 2005

Rae Review's Funding Plans Badly Flawed

Duncan Cameron & Frank Cunningham

Instead of higher education being a tacit contract between generations, we are being asked to think of it as a series of individual contracts made by private individuals.

The Bob Rae review of higher education documents the detrimental effects of underfunding in Ontario. But, despite championing higher education and increases in government funding, the review includes provisions that threaten adequate public funding.

By freeing universities to set fees (albeit within a new regulatory framework), they will certainly go up. But there is no mechanism in the world that can guarantee that student grants and loans will keep pace.

Students seeking general increases for loans or grants will require a government to make that decision.

The review calls for enhanced student loans and a system of income contingent repayment (ICR). Students will have up to 20 years to repay debt.

This is based on a flawed philosophy and it risks undermining the vital recommendations in the Rae review.

Instead of making the public investments called for in the review, Ontario ministers will be able to blame the universities for the tuition hikes and take cover behind the ICR student loans.

ICR loans come with major problems of implementation and administration. What means tests will be used? How far into the future will a student be monitored? How and by whom?

Will loans ever be forgivable, or will students learn to leave the country in order to avoid repayment, as has happened in New Zealand, which has such a scheme.

The ICR loans imply a principle of justice: Those individuals who profit from an education should pay for it.

In our view, the major motivation for moving to tuition hikes paid by loans is the supposition that public education can no longer receive adequate support through taxation.

Instead of thinking about higher education as a tacit contract between generations, we are being asked to think of it as a series of individual contracts made by private individuals.

In reality, people in one generation contribute, through taxes, to the provision of higher education for those in the next generation. Thus, while all students pay a portion of their education up-front in tuition, much of the cost is absorbed as people go further into the life cycle.

In the loans/tuition hikes approach, the same individuals who expect directly to profit from services, pay for them. This suggests education is like a commodity.

ICR schemes feed this idea. When students see investment in their education as individually theirs, rather than as a social investment, they make decisions about courses of study by estimating their personal economic advantages.

Moreover, they regard the skills imparted to them by a university as privately owned assets, rather than as talents of considerable benefit to the public of which they are the trustees.

This weakens support for public funding of education, and creates a downward spiral of support.

Defenders of ICR loans claim that generally affordable tuition fees provide a subsidy to children of the rich.

However, while wealthy families pay the same tuition for their offspring as those less well off, they also put more into general tax revenues.

No doubt, universities advocated ICR plans before the Rae commission because they are desperate for funds and assume that sufficient public resources are necessarily unavailable. We question this fatalistic attitude. An earlier Ontario commission, created by then-premier Bob Rae, the Fair Tax Commission, showed how public projects could be funded to promote economic growth and sustainable development.

Instead of throwing universities into a wasteful competition based on solicitation of scholarship students followed by tuition hikes, it would be far better to revisit the idea of a progressive income tax system, one based on ability to pay.

That remains the fairest way to pay for higher education and other public goods.

All of Ontario loses when a generation of students is forced to pay a greater portion of their education up-front and walks into society carrying a debt. This fails to account for the public benefits all of us derive from educating our young citizens.

Duncan Cameron is a research associate at the Canadian Centre for Policy Alternatives. Frank Cunningham is professor of philosophy and political science at the University of Toronto.

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