Tuesday, January 23, 2007

Issue Backgrounder: Tuition and Financial Aid

It's become clear, through comments, that most students don't really know how Universities are funded, and how the financial aid process works. And since it currently ranks highest on our survey as an issue, we're presenting this backgrounder. It's wonky, but hopefully in plain English.

1) Government funding
The government funds Universities in many ways. The largest one is its operating grant, which is based on the number of students (full-time equivalents, or FTEs) enrolled. It's a fixed amount, per student. This translates into a certain percentage of the cost being borne by government. Right now that's around 72%; most student groups think it should be higher. Right now the University is in deficit, for two reasons. Large increases in faculty salaries, and limited government funding.

2) Tuition
Tuition is one way to cover the difference between gov't funding, and costs. UBC has differential tuition, though, which means that there are differences based on programs. The lowest (basic undergraduate) is Arts, and it grows up to Commerce. Then there are programs like law (10k) and dentistry (43k). Tuition is set by UBC's Board of Governors. But the government has limited growth in tuition to inflation, or roughly 2%/year. International students pay much higher tuition; they have to pay 100% of their costs.

So what happens if you can't cover tuition? UBC passed Policy 72, which says that students who don't have enough money will have access to UBC. But in order to benefit, students must have exhausted all other options, including parental contributions and loans.

Loans, bursaries, and where the candidates stand, behind the cut.

3) Student loans
The government doesn't give much money; most of their money is in loan form, which means it has to be re-payed. (They do have loan forgiveness programs, which are after the fact cash awards.) There are some restrictions on eligibility:

  • Parental annual income must be below the threshold, OR the student must be 4 years out of high school
  • Student income must be below a certain level
  • If the student is married, or has assets like a house or car, those are counted against loan levels.
If a student meets all the criteria, the government assesses their need. Need is tuition plus the costs that the gov't assumes (living, books, rent, food, entertainment, etc.), minus resources. After that, the gov't will give you as much as meets the need, up to $10,800. This is a loan, split 70-30 between the federal and provincial governments, respectively.

4) Bursaries
If a student's total costs are greater than the loan amount, then they're eligible for need-based bursaries from UBC. First, the entire amount of available money ("the envelope") is calculated. Then, it's distributed to each student, as a percentage of their unmet need. So if student A has an unmet need of 5k, and B has an unmet need of 2k, and UBC has enough to meet 50%, then A will get 2500, and B will get 1000. Last year, for most undergrad programs, UBC was able to meet 100% of the unmet need. But for other programs, like law, medicine, and dentistry, they didn't.

So where does the money come from?
  • Bursaries donated by individuals. These are part of the endowment, but not the part related to development. They're where individuals donate a chunk of cash to the University. The University invests it, and the return on the investment goes to students.
  • Endowment generally. The entire value of the endowment (including development) is invested, and a portion goes to the bursary fund.
That's the basic funding regime. There are issues, though:
  • What of students whose parents refuse to support them?
  • Is putting the primary emphasis on loans helping or hurting students? Is a loan-based system producing the kinds of graduates we want?
  • Why is bursary support after loan support; should it be the other way around?
  • Should the government fund need-based grants, rather than just loans?
  • What's the impact of loans over grants?

Matthew Naylor argues for a grants system, and an agreement to set the level at which the government funds education.
Jeff Friedrich supports a cap on the tuition level paid by students, more financial aid for international students, and policy control of the endowment.
Joel Koczwarski argues for a 20% cap on tuition, and a return of the grants program.
Maxwell Maxwell stands for lower tuition.
Chris Brush supports a provincial grant program, and a percentage of construction revenues going towards tuition.
Tom Masterson supports grants as a way to alleviate student debt.