Ontario is in the process of designing a plan for postsecondary education (PSE) to follow Reaching Higher. The new plan will contain an array of policy goals and strategies, and some consideration must be given to a tuition fee policy. The current tuition fee policy was slated to end in 2009-10, but was extended by two years. A new framework must be in place for the 2012-13 academic year. This paper presents options for a new tuition framework. We do not rank the options or make a recommendation, believing that this decision is appropriately a political one be made by government.
Much has been written about tuition fees and tuition fee policy. Our contribution is to provide some context for the choices ahead. One perspective comes from recent research on higher education. There is an emerging consensus in the Canadian higher education literature that can help evaluate current policies and point to possible new directions. This body of knowledge is frequently missing from tuition policy discussions, either because it is not widely understood or, occasionally, because the implications run counter to long-held positions.
The other perspective is historical. Ontario’s choices will be shaped in good measure by the policies already in place and the priorities underlying them. Specifically, postsecondary education will continue to be viewed as a key contributor to the province’s economic and social goals, and expectations for the sector are likely to continue to focus on accessibility, quality, and accountability.
We begin by describing briefly the current tuition framework and pressures for change. This discussion makes clear that tuition fee policy is not just about tuition fees; it is equally about student financial assistance polices and about the revenue needs of
colleges and universities. Setting a new fee policy requires full appreciation of the complex interplay among these three factors.
We note that, contrary to often-expressed views, Canadian researchers find no consistent correlation between tuition fees and PSE participation and persistence rates. Part of the explanation for this result is that average private rates of return to
postsecondary education compare very favourably to those available from purely financial investments. Increases in tuition rates of the magnitude witnessed in Canada in recent decades apparently have not been large enough to alter this situation.
Another part of the explanation is that non-financial barriers loom large for some individuals.
Private rates of return are relatively high in part because governments have chosen to subsidize PSE in various ways. The public debate frequently focuses on average tuition fees as reported by Statistics Canada. Yet this focus is misleading. For many
students, particularly those with demonstrated financial need, the actual costs of PSE @ Issue Paper No. 6 • Tuition Fee Policy Options for Ontario
2 – Higher Education Quality Council of Ontario are substantially lower once grants, subsidized loans, tax credits and debt relief are taken into account. These government policies notwithstanding, there are still groups that are underrepresented in PSE in Ontario and it is apparent that financial barriers remain part of the explanation. Other factors include lack of understanding of the relative benefits and costs of postsecondary education and decisions made early in the schooling process that preclude a successful transition to PSE.
There is an emerging consensus in the literature on how to design support policies to offset financial barriers. Ontario has many of these features in place, but there are options for improvement. These changes should be considered no matter what new
tuition policy emerges, but it is especially important to do so if the new policy contains ongoing fee increases.
The process for deciding on a tuition policy requires simultaneous and interdependent decisions on three key PSE policy variables: the revenue needs of the colleges and universities in each year of the planning period, a tuition fee framework that balances contributions to these revenue needs with effects on accessibility, and the public funds available each year for operating grants plus contributions to student financial assistance.
Four types of tuition frameworks are presented and evaluated for strengths and weaknesses within the Ontario context: capped tuition fees, a shares approach, constrained deregulation, and full deregulation. We look briefly at several variant of fee caps: a rollback, a freeze, tying increases to the CPI, and retaining the status quo policy of a maximum allowable increase of 5%. We argue that there is no obvious cap figure. Any choice involves a balancing of revenue needs, accessibility, and fiscal capacity.
The same point applies to proposals to adopt a shares approach wherein tuition revenue is set at some portion of institutional operating revenue. There is no obvious share to aim at. Governments over many years, for a variety of reasons, chose to
increase the relative share of PSE operating costs borne by students. These decisions were made in conjunction with a host of other economic and social policy adjustments;
for example, tuition credits. Any decision to alter this trend must take this broader historical perspective into account.
The choice of a new fee policy must also involve consideration of the pros and cons of relaxing or even removing the current distinctions of allowable fee increases among programs. A constrained deregulation approach would remove these distinctions among programs but retain an overall fee cap. Complete deregulation would remove the distinction and the arbitrary cap, although it is perfectly compatible with a scheme to tax back a portion of fee increases for need-based financial assistance.