Postsecondary education is a matter of mindset, not just money

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The Liberal Party's proposed Learning Passport, intended to help families save for their children's postsecondary education, is one of the more interesting ideas to come out of the current election campaign. Not so much for what it could do to help with the actual financing of the schooling, but for how it could potentially be part of a broader policy initiative that goes beyond the existing focus on savings and affordability issues to address the non-financial barriers to PSE - the barriers that matter most.

Why is this important? Because we live in a knowledge economy that demands increasingly higher levels of schooling on the part of all workers. Because our economic competitors are all taking measures to these ends. And because the dwindling size of the working-age population as the baby boomers head into retirement forces us to make every worker count more than ever. PSE matters.

Many gains in educational attainment will have to come from groups that are currently underrepresented in PSE, especially at the university level. In the past, the policy focus has been on ensuring that those who wanted to go to PSE (and had the marks to do so) were able to afford it. Hence the concern with tuition fees, student financial aid and so on. The problem with this approach is that the empirical evidence increasingly shows that affordability is not the most important barrier to PSE. What matters most is that not enough young people want to go - they need to get the idea of PSE in their heads, and early enough so they can prepare, and thus gain the qualifications to be admitted to a program of their choice and the skills required to succeed when they get there.

This is why, for example, that children of certain immigrant groups (Chinese, in particular) attend university at rates as high as 90 per cent (average rates are between 36 per cent and 38 per cent), regardless of family income. Or why parental education is a much stronger indicator of who will go to PSE than family income. Once the idea of PSE is firmly planted in the child's mind, the money that's required will, it seems, be found. But if that idea doesn't take root, money matters little. The big policy challenge, then, is to get more youth thinking about PSE, and at an early enough age for it to matter.

At face value, the Liberals' proposal is merely about student financial aid. It would take government money out of some of existing PSE tax credits (and a bit more) and put it into savings grants, using the existing RESP system to do so. Specifically, every high-school student would have $1,000 deposited in their RESP account on an annual basis, provided one has been set up for them by their parents, the amount rising to $1,500 for youth from lower income families. The plan would thus be (potentially) universal, or "untargeted," but would have a degree of progressivity in that low-income youth would receive higher amounts.

The money going into the new program should represent an improvement over its current deployment because, unlike the existing PSE tax credits, it would provide the financing "up front" (i.e., it would be available to the student during the relevant year of college or university schooling rather than after), the amount of aid would be clearly indicated, and more money would be directed to the students who really need the help. So far so good.

One potential problem, however, is with the existing RESP system through which the new aid would be delivered, because it currently favours higher income families - even though the government gives lower income families money to put into RESPs. To the disappointment of policy-makers, and the bewilderment of many economists, RESP take-up rates remain disconcertingly low among poorer families. If this continued to hold with the new Learning Passport, it could wind up being as regressive and ineffective as the tax credits it would replace.

But while the Liberals' plan could be criticized precisely because it gives a good deal of money to higher income families that don't need it (their kids are likely going to PSE anyway, and they can afford it), it could be this very universality that saves it. That is, if opening an RESP became as simple, and as universal, as it needs to be. An alternative strategy would be to open accounts for high-school students automatically. But would such automatic deposits have the same psychological impact as a more active saving program - would students pay attention to, or even notice, the (notional) transfer of funds into a savings PSE account in their name? Would their behaviour change?

This is where financial aid becomes more than financial aid, as it also (ideally) gets students thinking about and preparing for PSE, and this is also where we are on new ground.

In a similar kind of program based on lower income youth tested in New Brunswick, half the students who had funds established in their name had completely forgotten about the existence of those funds by Grade 12. So much for such money affecting PSE planning. So much for students being the super-rational decision-makers many economists (and some policy-makers) assume they are.

A savings plan such as the proposed Learning Passport can probably do only so much in terms of affecting student decisions regarding PSE, and the early thinking about PSE needed to get them to that starting line. Any effective plan would likely require other elements, including mentoring, tutoring, visits to college and university campuses and discussions of the potential benefits of PSE - in short, the things that are typically provided in those families where the parents went to PSE or in cultures that place a high value on PSE, and that tend to be lacking in families where this is not the case. These are among the key elements in the Pathways to Education program in Toronto that claims such remarkable success in increasing PSE participation rates among disadvantaged youth and that received $20-million in last year's budget.

If the Liberals' Passport became part of such a broader strategy, it could potentially change PSE access patterns in a substantial way. So far, the evidence suggests money alone won't do it. Both Liberals and Conservatives now seem to support moves in this broader direction - the Conservatives' funding of Pathways, the Liberals' Passport.

This is, therefore, perhaps one policy area where there's general agreement that government has an important role to play, and a new cross-party understanding that we need to shift policy strategies to go beyond student finances. Parties - and governments - of all stripes should be commended for going in this direction. We should only hope that these policy ideas lead to more concrete initiatives, starting with a raft of tests to see which ones work best. In the cacophony of party disagreements, some more forced than others, this is a welcome harmony to hear.

Ross Finnie, a research fellow at the C.D. Howe Institute, is an associate professor in the Graduate School of Public and International Affairs and director of the Education Policy Research Initiative at the University of Ottawa.