Wednesday, September 17, 2008

Guest Blogging: Liberal Education Policy

The Liberals released their PSE platform today and, since I think this is an important and often overshadowed policy area, I figured I should critique it. As luck would have it, an expert in the field sent me in his (rather lengthy) synopsis of it which I will repost rather than giving my own 2 cents because:

A. He knows more about the issues than I do
B. That saves me the time of typing something up myself



From a student perspective it's close to a 9 [out of 10]. The feds can't lower tuition, but short of 100% grants for everyone, this provides a lot of support. Students (and a lot of the public) hate that the interest rates on student loans are so high.

From a policy perspective it's a mixed bag. The endowment is a serious investment and the grants will be helpful (although the conservatives already have their own grant plan). Turning back-end tax credits into cheques-in-the-mail is also great. It's a lot of spending though. I don't understand the need for BOTH a lower interest rate and a 2-year interest (and payment) holiday - that's alot of money. So, closer to a 7 on policy.

An upfront Education Grant payable to each student every three months at the same time as the GST rebate is paid to most students. This grant, when combined with the GST rebate received by most students, will be worth about $1,000 cash per student per year.

It is my understanding that this is replacing the education (and maybe the tuition?) tax credits.

Pros: Excellent idea. The current tax credits are quite regressive. You can only get nonrefundable tax credits if you are making enough income to pay taxes. Which for students usually means they either transfer them to their parents or wait until they are graduated and making good income. As a very much non-low-income earner once said to me “My son just bought a couch with his tax credits. Is that the best use of government money?” This will give money to students when they need it most. I haven’t done the math but hopefully this is budget-neutral. If it is, it seems like a great move.

Cons: Parents that currently get their kids’ tax credits might not be so happy. Hopefully these new grants won’t play havoc with the complicated needs-assessment system that is student financial assistance in Canada – will students have to claim this as income? This money could have been targeted better – either needs-based or aimed at specific students. But it’s good politics to have some universal assistance, and sometimes simple is better.

Creation of The Canada Education Endowment (instead of the Conervatives’ Canada Student Grant Program) in the sum of $25 billion, set up for 20 years. Quebec will have the option to not join the endowment. The Endowment will fund:
a) Research
b) $200,000 distributed annually in needs based grants (up to $3,500 each)
c) $100,000 distributed annually in access grants (up to $4,000 each) to provide financial assistance to help individuals who are members of groups such as Aboriginal Canadians and persons with disabilities that are traditionally under-represented in post-secondary education.

Pros: This is their way of saying “We will renew the Canada Millennium Scholarship Foundation.” A clear nod to CASA and the other groups that supported renewal. There are a lot of reasons why an endowment is a great idea. It is more stable and allows for a more flexible approach with the provinces. 20 years is a long time, though, and 25 billion is a huge amount of money! (I may have these numbers wrong, I will have to double check) Millennium was originally created with $2.5 billion for ten years and did some amazing things with that money.

It’s great to see research in there, as the current government has not indicated that it will do anything to replace the CMSF’s research capacity. Targeted access grants are great, so it’s good to see them keeping that aspect of the CSGP. Special status for Quebec will probably make Charest happy. And oh yeah, this will freak the CFS out.

Cons: While I think there are clear policy advantages to an endowment, I can’t say how it will play politically. I’ve been in the PSE bubble for far to long to be able to figure that out, but I’m interested to see the debate, especially how the provinces respond. A $25 billion, 20 year endowment is a huge spending pledge – will it garner that many votes? They are borrowing the money to create the endowment, I’m not sure how that will play out.

The government is already moving forward on the CSGP, so this would involve scrapping that work. That’s democracy though. I don’t like the 2:1 needs-based to targeted ratio, but it probably is a lot easier to sell than putting all the money towards low-income, students, etc.
Special status for Quebec will probably make everyone else unhappy.

Lowering the Student Loan interest rate to prime + 0.5%

Pros: About freaking time. While students aren’t directly affected by interest rates until they graduate, they are worrisome. High interest rates cause a lot of stress for recent (and not so recent) graduates.

Trust me, this is the number one issue people in general have with student loans. This will be popular for good reason.

Cons: Most people in PSE policy circles actually don’t like the idea of lowering the interest rate. Despite the common perception that rates are really high and that the government makes money from student loans, this isn’t true. When you factor in the interest subsidy (4+ years interest-free for university students) and the interest rate tax credit, ‘real’ student loan interest isn’t that high. This will be a huge cost for the government. There is a strong argument to be made that you could do a lot better with that kind of money.

I understand but disagree with that analysis. Despite the fact that ‘real’ interest isn’t high, that doesn’t change the fact that a student could graduate and (if they can get approved) pay off their
government loan with a private low-interest loan. That isn’t good for anyone. Politics and policy are sometimes about appearances and an apparently-high interest rate can be just as bad as a real one.

Re-instating the Student Loan ‘grace period’ to be interest-free (it used to be, but is no longer for federal loans) and extending it to 2 years.

Pros: You really shouldn’t call it a grace period any more if it’s not interest-free. The interest-free status just makes sense, as most students assume it is interest-free anyway. 2 years is a long time, this will play extremely well with students. It’s not clear if they are extending the time you wait to repay your loan to 2 years, but if they are that will make students, graduates (and probably parents) very, very happy.

Cons: Wow. Extending interest-free status to 2 years will be very, very expensive (see previous comment re: math). And if they extend the period you wait to repay your loan to 2 years, that will be incredibly expensive. Would there really be enough benefit from this to justify the cost? I seriously doubt it, there are surely better things that could be done with such a huge sum of money. This doesn’t seem to make sense if you are also lowering the interest rate. This will play well with students, obviously, but does the public really think university students should get a 6+ year interest-free loan?

Make all students eligible for guaranteed student loans of $5,000, regardless of parental income.

I’m assuming you’d still have to qualify for the loan, but most students will.

Pros: Well, I campaigned for the elimination of expected parental contribution for most of my time in student politics, so I should love this. This acknowledges that (most) students are adult learners, as the new language goes. This is a big issue for students and their parents. It addresses the belief/fact that middle-income families get screwed by the financial aid system. This will be popular and a big vote-getter.

Cons: I’m a bit torn on this one. I’ve always believed students should be treated like adults, and while grant funding should be targeted at low-income students, almost anyone should be able to borrow to finance their education. These are subsidized loans though, and they do cost the government quite a bit. There is the risk that people who no not really need the loans, or who get money from their parents, taking advantage of them. The last thing you want to hear about is the BComm student who takes out a $5000 taxpayer-subsidized interest-free loan every year to buy GICs.

Increasing support for the Indirect Costs Program to $500 million a year which will represent an increase of over 60 per cent above current levels.

Pros: Universities will love this. It is a good policy, which lowers university overhead.

Cons: Students won’t see a dollar of this, directly or indirectly. Does the public care about the specifics of research funding accounting?

Increase the annual funding levels of CIHR and NSERC to $1.275 billion from their current levels of $960 million. Increase the annual funding level of SSHRC to $450 million from the current level of $320 million.

Create a new Interdisciplinary Sustainability Fund of $100 million. This fund will be available to scientists, researchers and graduate students for projects that reach beyond the barriers of their discipline.

Make the Science, Research & Experimental Development (SR&ED) Tax credit 25 per cent refundable through the Green Shift.

Pros: Research is good - especially when you are trying to stimulate the economy and improve productivity. Interdisciplinary research is also good. Universities, and probably industry, will love this (no talk of commercialization for industry though).

Cons: I’ve never believed research is much of a vote-getter. SSHRC who?

Extend the time period that individuals have to repay their student loans.

Design new student loan programs that will increase access for under- represented groups such as Aboriginal Canadians.

No real details on these two points.

Overall this is an impressive platform. A lot of significant policy proposals that will improve the PSE system. Students should be pretty supportive of this, and CASA will be very happy, I wager. It’s expensive though, and not all the money is well-spent. I’m interested to see how this plays out. Although issues haven’t’ really been playing-out in the campaign thus far, so it probably won’t matter…

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  • Research funding announcements are interesting. I'm sure the public supports research, but I agree, I doubt most people could tell you what SSHRC, NSERC, etc. is. It's also really hard to quantify what kind of benefit you get for $100 million in research funding compared to other spending.

    By Anonymous Anonymous, at 7:16 p.m.  

  • This may make for good policy, but the Libs need to work on the messaging. Saying something like "a year of free tuition" would be a lot easier for students to understand.

    Now it just looks like another spending promise in a long line of spending promises.

    By Anonymous Anonymous, at 8:05 p.m.  

  • "that doesn’t change the fact that a student could graduate and (if they can get approved) pay off their
    government loan with a private low-interest loan."

    Except that if you do that, you lose the benefit of an income tax break on the interest paid on the loan. It's not always to your benefit to pay it back with a lower interest loan.

    By Blogger Bailey, at 9:08 p.m.  

  • It depends on the interest rate of course. If you can get prime + 1 (which some people can) then that's generally better than the government rate, even when you subtract the tax credit.

    By Anonymous Anonymous, at 9:18 p.m.  

  • More research spending may not have a directly quantifiable effect, but it's an imperative for maintaining and increasing productivity and can produce important economic spinoffs.

    Anyway, I like my professional student LOC at prime, but I could do without the tens of thousands of debt I'll wrack up over the next four years.

    By Blogger JG, at 9:50 p.m.  

  • Interesting analysis from your guest, but does this person have a name? Or has s/he requested to remain anonymous?

    By Blogger Maestro, at 10:35 p.m.  

  • Also, according to the Liberal website, the plan provides 200,000 / 100,000 grants in total per year, not $200 000 / $100 000 worth of grants per year.

    By Blogger Maestro, at 10:42 p.m.  

  • maestro - yes, he/she requested anonymity.

    By Blogger calgarygrit, at 11:07 p.m.  

  • Funding for aboriginal education of their own culture should be prioritized.I believe they have plenty to offer this world.They are of their respective countries and our equals.There is no reason for reservations unless it can support itself and is wanted by that particular native community.

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