The Price of Knowledge 2006-07 Access and Student Finance in Canada

Saskatchewan Institute of Public Policy

Joseph Berger Canada Millennium Scholarship Foundation June 13, 2007

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The Price of Knowledge 2006-07

1. Why Access Matters 2. Barriers to Post-Secondary Education 3. Student Finance in Canada 4. Governments 5. Student Debt

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The Price of Knowledge 2006-07

Why Access Matters

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Youth Population Medium Growth Projection
2006 Population 18- to 24-Year-Old Population

3.199 million

285,000 fewer 18- to 24-yearolds between 2011 and 2021 3.106 million

2.914 million
2006 2011 2016 2021 2026

Statistics Canada, CANSIM, table 052-0004 and Catalogue no. 91-520-X. Last modified: 2005-12-21.

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Youth Share of the Population and Dependency Ratio Projections
16% 14% 12% 0.44 10% 0.4 8% 14% 6% 4% 2% 0% 2006 2011 2016 2021 2026 2031 13% 0.3 12% 11% 11% 11% 0.2 0.1 0 0.44 0.51 0.47 0.5 15- to 24-year-old share of the population Dependency Ratio 0.61 0.57 0.6 0.7

Statistics Canada, Population Projections for Canada, Provinces and Territories (December 2005).

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Aboriginal Share (projected) of the 15- to 24-Year-Old Population in 2006 and 2017
CANADA Territories BC AB SK MB ON QC Atlantic % 2.3% 2.4% 1.8% 2.2% 3.7% 4.5% 10% 20% 30% 40% 50% 60% 70% 80% 6.1% 5.9% 7.5% 8.8% 21.2% 31.0% 19.4% 23.9% 2006 2017 4.9% 5.6% 62.8% 70.4%

Statistics Canada (2005), Projections of the Aboriginal populations, Canada, provinces and territories

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Educational Requirements of Todays Jobs

High school or on the job training 34%

High school or on the job training 35%

College 29%

College 31%

66%
University 26% University 22%

65%

Management 11%

Management 12%

Bergeron, Louis-Philippe, et al. (2004), Looking Ahead: A 10-Year Outlook for the Canadian Labour Market, 2004-2013.

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Post-Secondary Participation Two Years After Graduating High School
Continuing or completed PSE Dropped out of high school, never pursued PSE or dropped out of PSE
83% 72% 60% 52% 39% 28% 17% 31% 48% 40% 70% 61%

General population

Parents - No PSE

Parents Completed PSE

Parents University Degree

Aboriginal

Non-Aboriginal

Malatest (2006), Class of 2003; and Shaienks, Eisl-Culkin and Bussire (2006), Follow-up on Education and Labour Market Pathways of Young Canadians Aged 18 to 20 Results from YITS Cycle 3

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Participation in Post-Secondary Education Among 18- to 24-year-olds Living with at Least One Parent in 2001 by Family Income and Parental Education
81% 68% 60% 49% 63% 53%

76%

77%

Less than $25,000

$25,000 $50,000

$50,000 $75,000

$75,001 $100,000

More than $100,000

High school or less

Some postsecondary

University

Drolet (2005), Participation in Post-secondary Education in Canada: Has the Role of Parental Income and Education Changed over the 1990s?

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Projected Post-Secondary Enrolment in Canada by Demographic Scenario, 2005 to 2021
Optimistic demographic scenario Pessimistic demographic scenario 2005 enrolment

2,000,000 1,950,000 1,900,000 1,850,000 1,800,000 1,750,000 1,700,000 2005 2009

2013

2017

2021

JDMD Groupe conseils (2006), Demographic and Economic Trend Analysis and Projections.

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Participation Rate of Youth in the Bottom Four Income Quintiles Necessary to Maintain 2005 Enrolment Levels by Demographic Scenario, 2006 to 2021
56% 54% 52% 50% 48% 46% 44% 42% 2006 2011 2016 2021 Optimistic Scenario Pessimistic Scenario

JDMD Groupe conseils (2006), Demographic and Economic Trend Analysis and Projections.

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The Price of Knowledge 2006-07

Barriers to Post-Secondary Education

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Barriers to Access and Persistence
Never attended
31% 29% 27% 22% 19% 14% 33%

Discontinued

13% 9% 8%

12%

11%

10%

Finances

Career indecision

Lack of interest

Program not what expected

Employment

Academic challenges

Personal/family

Malatest (forthcoming), Class of 2003

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Financial Barriers
Among those who cited financial barriers to access (33%) or persistence (22%)
Never attended Discontinued 24% 21% 18% 16% 12% 18% 15% 11% 11% 7%

25%

6%

Concerned about too much debt

Not enough money to attend

Program too expensive

Too expensive to leave home

Benefit not worth the cost

Want to earn money right away

Malatest (forthcoming), Class of 2003

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Financial Barriers: The Pull of the Labour Market
15- to 19-year-old average employment rate Percentage who worked immediately following high school 53% 49% 43% 34% 26% 25% 20%

54%

Alberta

Manitoba

Saskatchewan

New Brunswick

Malatest (forthcoming), Class of 2003

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Academic Barriers: Literacy Scores at Age 15 and Post-Secondary Education
Graduated high school by age 19 89% 77% 62% 45% 28% 62% 76% Enrolled in post-secondary by age 19 98% 95% 88%

Lowest level

Level 2

Level 3 Literacy proficiency level

Level 4

Highest level

Knighton, and Bussire (2006) Educational Outcomes at Age 19 Associated with Reading Ability at Age 15.

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Informational/Motivational Barriers: Expectations and Reality
High school seniors expect 84% 76% 74% 69% 83% 86% 73% First-year full-time dependent university students receive Full-time dependent college students receive 59% 48% 43% 35% 31%

16%

0.4% Income from work Parental support Scholarships Government aid Co-op income

Prairie Research Associates (2005), Secondary School Student Survey, 2003-04 Pan-Canadian Student Financial Survey

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Informational/Motivational Barriers: Family Discussions About PSE
Parents reported
Talking to their kids about PSE 84%

Talked to their kids about financing PSE

38%

Talking to their kids about government student aid

13%

Canada Millennium Scholarship Foundation (2006), Closing the Access Gap: Does Information Matter?

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Low-Income Families: Planning
Proportion of Ontario university applicants discussing finances with their parents before grade 10
43% 38% 32% 23% 19%

Less than $30,000

$30,000$50,000

$50,000$90,000 Family Income

$90,000$120,000

More than $120,000

Acumen Research (2004), Ontario University Applicant Survey

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First Generation: Planning
High school students who plan to work after high school and study later
No PSE Both Parents College Both Parents University 33%

26% 22% 17% 16% 17% 15% 10% 11% 8% 9% 8% 11% 10% 10% 8% 18% 15% 13% 23% 18%

Grade 6

Grade 7

Grade 8

Grade 9

Grade 10

Grade 11

Grade 12

Prairie Research Associates (2005), Secondary School Student Survey

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First Generation: Attitudes High school seniors attitudes about PSE by parental education
No PSE 76% 64% 48% 80% 65% 69% 61% 71% College/apprenticeship University (both parents) 76%

Need post-secondary to get a good job

Paying for post-secondary is a There are other benefits to postgood investment secondary besides a good job

Prairie Research Associates (2005), Secondary School Student Survey

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Aboriginal Youth: Academics On-reserve Aboriginal population with less than high school education, aged 20 to 24 in 2001
71% 58% 44% 40% 27% 60% 55% 46% 61% 61%

CANADA

NL

NS

NB

QC

ON

MB

SK

AB

BC

Mendelson (2006), Aboriginal Peoples and Post-Secondary Education in Canada

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Aboriginal Youth: Barriers On-reserve Aboriginal youths reasons for not pursuing postsecondary
59%

40% 27% 25% 20% 18%

Neet to support Lack of funds family

Don't want to leave community

Grades too poor

No need for PSE

Dislike school

Canada Millennium Scholarship Foundation (2005), Changing Course: Improving Aboriginal Access to PostSecondary Education in Canada

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Interacting Barriers Senior high school students were asked whether various factors posed a barrier to them continuing their studies after high school. Of those who said that 68% said they faced a 66% said they faced poor school marks financial barrier a barrier related to were a barrier: their lack of interest in further studies or career direction Of those who said that 67% said they faced a 45% said they faced their lack of interest or financial barrier an academic barrier career direction posed a barrier: Of those who said they 54% said that they faced a financial faced a barrier related barrier: to lack of interest or career direction 38% said they faced a barrier related to poor school marks

Prairie Research Associates (2005), Secondary School Student Survey

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The Price of Knowledge 2006-07

Student Finance in Canada

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Distribution of Student Expenditures by Type of Post-Secondary Education
College students
33% 29% 27%

University students

21% 16% 14% 12% 10% 7% 10% 8% 13%

Tuition and fees

Accomodation and food

Transportation

Books/computer

Debt payment

Other

2003-04 Canadian Student Financial Survey

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Financial Resources

2/3 of students rely on at least three sources, usually a combination of:

Work Government loans Savings Parental contributions

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Making Ends Meet Full-Time Students
$4,000

Total Income and Expenditure and Balance over the Year (Before Borrowing)
Income before borrowing

$3,000

Expenses Balance before borrowing

$2,000

$1,000

$0 Baseline -$1,000 September October November December January February March

-$2,000

2003-04 Canadian Student Financial Survey

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Making Ends Meet Full-time Students
$5,000

Total Income and Expenditure and Balance over the Year (After Borrowing) Income after borrowing Expenses Balance after borrowing

$4,000

$3,000

$2,000

$1,000

$0
Baseline September October November December January February March

-$1,000

2003-04 Canadian Student Financial Survey

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Parental Contribution by Family Income
$4,500 $4,000 78% $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 $30,000 or less $30,000 - $50,000 $50,000 - $73,000 $73,000 - $100,000More than $100,000 $1,837 40% 30% 20% 10% 0% 64% 72% $2,856

Average amount

Incidence of parental contribution

89% 84% $3,588

100% 90% 80% 70% 60%

$2,169

$2,169

50%

2003-04 Canadian Student Financial Survey

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Assessed Need Levels of Millennium Bursary and Millennium Access Bursary and Grant Recipients by Institution Type in 2005-06
Millennium Bursary Access Bursary
$14,968

$11,284 $9,048

$11,506

$11,555

$11,595

$8,558 $7,327

University Students

College Students

Private Career College Students

All Students

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The Price of Knowledge 2006-07

How Governments Support Students

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Probability of Degree Completion in Relation to Annualized Aid
100% Proportion who completed a degree 90% 80% 70% 59% 60% 50% 40% 30% 20% 10% 0% Under $1,000 $1,000- $1,999 $2,000- $2,999 $3,000- $9,999 Annualized financial aid
Lori McElroy (2005), Student Aid and University Persistence: Does Debt Matter?
Grant + Loan Loan Only

79%

78%

75% 62%

48%

52% 38% 28%

8%

$10,000+

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Dollar Value of Federal Education-Related Tax Expenditures, 1994- 2007
$1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Scholarship/bursary exemption RESPs Student loan interest credit Credits carried forward Transferred credits Education credit Tuition credit

Christine Neill, Canadas Tuition and Education Tax Credits

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Total Need-Based Financial Aid in Saskatchewan, 1993-94 to 2003-04 (in millions of 2005 dollars)
Loans Grants and Remission

$180 $160 $140 $120 $100 $80 $60 $40 $20 $0

1993-94 1994-95 1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

Educational Policy Institute, The State of Student Aid in Canada

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Total Universal Financial Aid in Saskatchewan, 1993-94 to 2003-04 (in millions of 2005 dollars)
$120

Tax Credits - Canada

Tax Credits - Manitoba

CESGs

$100

$80

$60

$40

$20

$0
1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04

Educational Policy Institute, The State of Student Aid in Canada

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Proportion of Repayable and Non-Repayable Need-Based Financial Aid in Canada, 1993-94 to 2003-04 (in millions of 2005 dollars)
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% %
1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04

Net Loans

Grants and Remission

Ontario accounting change

Educational Policy Institute, The State of Student Aid in Canada

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Distribution of Total Need-Based and Universal Student Aid in Canada by Type, 1993-94 to 2003-04
Net loans 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% %
1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04

Loan remission

Grants

Tax credits

CESGs

Merit/other

Educational Policy Institute, The State of Student Aid in Canada

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Total Universal Student Aid in Canada by Source, 1993-94 to 2003-04 (in millions of 2005 dollars)
$3,000 Federal Governments $2,500 Provincial Governments

$2,000

$1,500

$1,000

$500

$0
1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04

Educational Policy Institute, The State of Student Aid in Canada

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Total Expenditures on Need-Based and Universal Student Aid by Type, 1993-94 to 2003-04 (in millions of 2005 dollars)
$3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 1990- 1991- 1992- 1993- 1994- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 200391 92 93 94 95 96 97 98 99 00 01 02 03 04 Need-Based Universal

Educational Policy Institute, The State of Student Aid in Canada

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Provincial Grants and Remission
All Provinces $1,200,000,000

$1,000,000,000

$800,000,000

$600,000,000

$400,000,000

$200,000,000

$0 1994-95 1995-96 1996-97 1997-98 1998-99 1999- 2000-01 2001-02 2002-03 2003-04 2000

All figures in constant 2005-06 academic year dollars

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Provincial Grants and Remission
$1,200,000,000 Ontario Rest of Canada

$1,000,000,000

$800,000,000

$600,000,000

$400,000,000

$200,000,000

Ontario accounting change

19992000 2000-01 2001-02 2002-03 2003-04

$0 1994-95 1995-96 1996-97 1997-98 1998-99

All figures in constant 2005-06 academic year dollars

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Provincial Grants and Remission
$1,200,000,000 Rest of Canada $1,000,000,000 Ontario

$800,000,000

$600,000,000

Ontario accounting change

$400,000,000

$200,000,000

$0 1994-95 1995-96 1996-97 1997-98 1998-99 19992000 2000-01 2001-02 2002-03 2003-04

All figures in constant 2005-06 academic year dollars

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Provincial Student Aid Recipients in Canada, 1994-95 to 2003-04
600000
522,723 415,239

500000

400000

300000

200000

100000

0 1994-95 1995-96 1996-97 1997-98 1998-99 19992000 2000-01 2001-02 2002-03 2003-04

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The Price of Knowledge 2006-07

Student Debt: Trends and Consequences

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University Graduate Debt in Canada in 2006 Dollars, 1990-2006
Amount in current year dollars $30,000 56% $25,000 45% $20,000 $15,809 $15,000 $11,636 $10,000 $8,337 $12,671 45% $20,286 $23,329 $21,437 $20,074 $24,047 55% 45% 35% 25% 15% 5% -5% 1990 1995 2000 2003 2006 Amount in 2006 dollars 59% Incidence 59% 65%

$5,000

$0

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More on University Student Debt

1. The amount of average debt has stabilized in recent years, but student aid policy changes are likely to lead to increases in the coming years. 2. Theres a need for additional borrowing not met by government. Thirty-nine per cent of all funds borrowed in 2006 came from financial institutions and family, up from 31 per cent three years earlier. 3. University graduates who plan on pursuing more education had less debt (about $3,200) than those who did not. 4. No apparent relationship between amount of debt and anticipated post-study income.

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Change in Accumulated Debt Among College Students with Debt outside Quebec, 2003-06
< $5,000 40% 34% 30% 35% 31% 32% 29% 25% 20% 17% 15% 10% 18% 26% 29% $5,000 - $10,000 $10,001 - $15,000 > $15,000

15%

14%

15%

43% report no debt in 2006

0% 2003 (n=6,478) 2004 (n=7,202) 2005 (n=7,324) 2006 (n=6,846)

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More on College Student Debt

1. In 2006 47 per cent of college students who had no debt planned to pursue further post-secondary studies, compared to fewer than 40 per cent of those with debt and 21 per cent of students with more than $30,000 of debt. 2. College debt catching up to university debt?

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Managing Debt: Approaches 1. The eight per cent rule: student loan payments should not exceed eight per cent of a graduates pre-tax earnings. (The banks perspective.) 2. Other approaches one size fits all fits none. 3. Two principles and a conclusion (Schwartz and Baum): 1. Graduates with very low incomes cannot reasonably be expected to meet their repayment obligations. 2. The more a graduate earns, the larger the share of his or her income should be devoted to debt repayment. 3. Those earning lower (but not the very lowest) incomes should be expected to devote between five and ten per cent of pre-tax discretionary income to student loan repayment, with the payment-to-income ratio being capped at 18 to 20 per cent for those earning much higher incomes.

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Conclusion 1. Post-secondary education and Canadas needs 2. Overcoming barriers to PSE 3. Targeting public funds effectively 4. Post-secondary outcomes

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The Price of Knowledge 2006-07
Canada Millennium Scholarship Foundation
Joseph Berger jberger@bm-ms.org 1-877-786-3999 www.millenniumscholarships.ca