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Rich students see debt as an investment, one poor students are reluctant to make. (Photoillustration by Marcelle Faucher)
Rich students see debt as an investment, one poor students are reluctant to make. (Photoillustration by Marcelle Faucher)

Campus Life

What works for rich students discourages poor ones Add to ...

Postsecondary education has never been more essential to an individual’s success in the labour market, a fact increasingly recognized by students and their families. Recently, Statistics Canada reported that postsecondary enrollment increased 2.7 per cent nationally between 2010 and 2011. In many ways, heavy government investment in student financial assistance has made this increase possible, giving students access to loans and grants to meet high educational costs.

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However, for such an important investment, financial assistance is rarely thoroughly evaluated and researched. The question of whether it really is equalizing access to postsecondary education is still the source of much debate, with relatively little analysis informing the debate.

It is for this reason that student groups like the Ontario Undergraduate Student Alliance and the College Student Alliance conduct regular surveys on financial assistance use. For instance, the latest Ontario Post-Secondary Student Survey polled 7,298 students, about 8 per cent of full-time undergraduates at participating universities. The survey asks students a series of questions on financial assistance use, as well as parental income and family education.

Financial Assistance is Helping Some Lower and Middle-Income Students Afford Rising Costs

Overall, more than half of our survey respondents applied for government assistance and approximately 43 per cent received it. This means that approximately 83 per cent of students who applied for aid received it. The total range of assistance disbursement was not that varied across the sample, with 40 per cent of students receiving up to $6,000; 27 per cent receiving between $6,001 to $10,000; 20 per cent between $10,000 and $13,000 and 14 per cent over $13,000.

One clear relationship that emerged from the data was that financial assistance use is higher amongst those with lower parental incomes. Eighty-two per cent of students from the lowest income quintile applied for government assistance, compared with 21 per cent of students from the highest. The average loan amount for all students was $6,620 with that amount rising to $7,292 for students with parental incomes between $25,000 and $50,000 and $8,045 for students with parental incomes below $25,000 a year.

By and large, the data suggests that most students who don’t have the funds to pay for school up-front apply for government assistance.

However, Loans Might not be the Most Effective Tools for Low-Income Students

Student loans are highly controversial, with many rightly pointing out that the long-term effects of high education-related debt loads could be disastrous for students and the broader economy. For low-income students specifically, debt is a massive source of concern – not a surprise. Eighty-three per cent of the lowest-income students surveyed were concerned about debt, compared to only 24 per cent of the highest income students surveyed. Over a third of high-income students were concerned with having enough money to complete their education, but for low-income students that number grew to 87 per cent.

There is a well-documented trend toward price sensitivity among low-income students. Price sensitivity is a perception that the benefits of postsecondary education are less worthwhile than the costs. Studies of low-income students have repeatedly shown that they are more likely to perceive the opportunity cost of postsecondary education as being high, due largely to a perception that the costs of higher education are severe.

This may have an impact on student choice. A recent study of university application data by three professors at McMaster University in Hamilton, Ont., found that in arts and science programs, a decrease in the net cost of university (tuition minus scholarships) led to an increase in students from low-to middle-income neighbourhoods. There was no similar impact for commerce and engineering students. In addition, the study also showed that high-income students have driven enrollment increases.

Keeping Tuition Low and De-Coupling Loans and Grants Can Offer a Way Forward

While financial assistance is helping students afford rising educational costs, the data tell us offering student loans is not a surefire way to ensuring equitable access to postsecondary education. Clearly, some low-income students are opting not to take out assistance due to government debt aversion. What isn’t clear is the number of individuals who fall into this category that simply opt never to attend postsecondary. Some studies have suggested that as many as 10 to 30 per cent of graduating high-school students are unwilling to go into debt to pay for postsecondary education.

It is a little-known fact that most government grants in Canada require that students also apply for student loans. If loans and grants were to be de-coupled, perhaps some progress could be made with low-income debt-averse individuals, allowing them to access assistance without the added debt.

Chris Martin is the director of research for the Ontario Undergraduate Student Alliance.

Campus Life looks at issues affecting faculty, teachers and students in the education system.

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