It’s a mistake to cut tuition in Ontario

Last week, the Ford government announced a number of changes to higher education policy. Some of the changes made good sense. For example, the government has reformed the OSAP program by cutting grants to students from higher-income families.

At the same time, however, the Ford government also announced an unfocused and unhelpful policy change by cutting tuition fees at colleges and universities by 10 per cent. This move will do little to improve access to higher education and has the potential to undermine the quality that education.

Let’s start with a little bit on the economics of higher ed.

The cost of attending college or university is currently split between students and the provincial government. Tuition covers a fraction of the cost. The government picks up the tab for the rest. The cut in tuition fees, which is not offset by an increase in provincial funding for schools, therefore means two things.

First, universities and colleges will simply have less money. Second, the division of the costs between students and government will shift—the share paid by students will go down, the share paid by government will go up. The case for this type of shift in burden-sharing away from students is weak.

Remember, there are large private benefits associated with higher education that flow to the students in the form of higher lifetime earnings after school. Since they reap most of the benefits, it’s fair that students bear a significant share of the cost.

Also, young people from higher-income families are far more likely to attend post-secondary education than young people from lower-income families. In other words, the post-secondary student population (on average) comes from families with higher incomes, and then goes on to have higher incomes than the rest of the population. Heavily subsidizing participation with blunt across-the-board measures such as tuition reductions is therefore a regressive policy strategy.

In light of these facts, it’s important to think clearly about the role of government in financing higher education. What is the government’s job? Well, the government should try to make sure that students who would benefit from higher education aren’t prevented from doing so by financial barriers. This process should include helping inform young people from lower-income families about the financial returns to higher education (which are frequently underestimated) and by making targeted assistance available to those who need help. Again, overly blunt policies such as slashing tuition, which delivers the same benefit to all students regardless of their need, is an inefficient way to achieve this objective.

To recap, the money to fund high-quality academic programs must come from somewhere, and fairness demands one of the most important sources of that money should be the group that benefits from those programs in the form of higher lifelong earnings—again, the students themselves. Limiting schools’ ability to raise money from this group through a flat tuition cut will do little if anything to promote access while potentially undermining educational quality.

The Ford government was on the right track reforming OSAP and better targeting those scarce resources. But it should have applied the same logic in its approach to university tuition instead of slashing tuition fees for all students whether they need the help or not.