Higher University Tution and More Financial Aid?

I read an interesting article in Maclean's, “Why Canadian students graduate with more debt, not less.” The article states that although US tuition fees are higher than Canadian tuition fees. Surprisingly, Canadian students graduate with more debt. Why is that? More financial aid is available from American universities.  

“In the U.S., average debt at graduation rose to $25,250 in 2010, according to a Nov. 3 report by the Project on Student Debt. Here in Canada, students were graduating with an average debt of $26,680 according to a 2009 report released by the Millennium Scholarship Foundation. If anything, the Canadian average is higher now.”

The US financial aid is from the federal government and the universities themselves. The writer further states that, “by charging students from wealthy backgrounds high rates, universities are able to provide significant aid for students from low-income backgrounds.”

Essentially the rich are supplementing the tuition of the poor. If you like this system, the powers-that-be will have to determine what is considered rich and low-income. In fact, parents’ income will be used to decide the students’ income level. Then a ‘fair’ means test will have to be devised and recipients will have to complete this test. And so, some will be judged ‘low-income’ and benefit and others will be deemed ‘rich’ and will be required to pay the full, published tuition. Of course, they will be a percentage of students and parents who will feel that they were unfairly labeled as rich.

Do you prefer to pay a lower tuition with less financial aid? Or a higher sticker price with the possibility of getting a reduction as a result of financial aid?

Scholarship vs. Reputation

Here’s an interesting question for you: Would you select a university solely because you received a large scholarship or free tuition?

I bet your first reaction is yes. But this assumes that you applied to that university because they met many of your other criteria. However, would you apply to a university simply because you believe you will be awarded a large scholarship or free tuition?  Take a look at this article about Lakehead University offering a full tuition scholarship for high school students with a 95% average of higher. There are other universities that offer similar scholarships, the minimum average may differ but not likely to be lower than 90%. Of course, if you have such a high average, you have many options, including other universities offering you a full ride scholarship.

Generally speaking university scholarships are like signing bonuses. The university finds your profile attractive and they want you to be an alum of their institution. They are banking of you going on to do bigger and better things. If you are fortunate enough to be in this situation, you’ll notice that there are different scholarship values being offered to you. This is largely due to the difference in the quality of each university’s applicant pool. Obviously, if the institution have a number of applicants like you, the lower the scholarship amount. Conversely, if you represent a small percentage of their applicants, the higher the award value.

However, if you’re that fantastic, shouldn’t you go to the university with the best reputation? Or the university that you gives you the best career prospects or opportunities to further your studies?  Some would also say that the institution where you received your first degree is less important than the universities which granted your advanced or professional degrees. But the reputation of your university can affect what doors are more readily available to you. The alumni network is another variable for you to seriously consider. Which university will give you the best connections in your future?

Essentially the decision is between financing and reputation. But you have to realize that reputation is also correlated with highly important variables like the quality of faculty, classmates, facilities, experience, services, alumni network, as well as employability. Everyone’s situation is different so you’ll have to decide what’s best for you.

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Affordability of Post-Secondary Education in Canada

Last month, children across Canada headed back to grade school. This month, Canadian parents can turn their attention to how they are going to afford to send them off to colleges and universities. According to a BMO Financial Group study released today, more than two-thirds of Canadians (69 per cent) are concerned about the affordability of post-secondary education in Canada.

A four-year university degree can currently cost upwards of $60,000, and various sources estimate that a child born in 2011 could encounter education costs of approximately $140,000 when they are ready to enter university.

Read full story here

Here's a table I prepared of tuition at Canadian universities to help you budget.

Why Low-income Students Don't Go to University?

According to The Higher Education Quality Council of Ontario (HEQCO):

Low-income youth attend post-secondary institutions in lower numbers and that the gap is widening. Young people must first understand the inherent value of what higher education can provide, understand the difference between the sticker price and the true cost, make the financial commitment to engage in it, have the ability to wade through the forms and applications for grants and loans, be able to financially survive during their post-secondary education, and ultimately understand the terms of repayment if they received a loan. This is a lot to ask of teenagers, particularly if the teenagers do not have the family background or social network to guide them.

In Financial Literacy of Low-income Students: Literature review and environmental scan, the authors found that low-income students tend to vastly overestimate the cost of post-secondary education while both low- and high-income youth underestimate the economic benefits of attending university. Knowledge about financial aid programmes is lacking even among university students who hold student loans.

The HEQCO found only 2 programs in Canada, the Toronto-based Pathways to Education Canada and the Manitoba-based Career Trek, that simultaneously promote participation in higher education while offering some financial literacy support targeted to lower-income youth.

Read the full article here

Do Students Need Credit Cards?

The following is from the Financial Post:

Thirty years ago, it was unthinkable that a bank would give a credit card to an 18-year-old with no income. Graduating students were sometimes able to get credit cards but they usually had $500 spending limits – not $5,000. Today, students can fill out application forms that are practically pre-approved.  Moreover, many credit card companies market their products to freshmen during university orientation weeks by offering them gifts – such as sweatshirts – if they apply for cards.

Middle- and upper-class students living at home and working part time are especially prone to developing what the industry calls “premature affluence”.  Since they usually don’t have to pay for their living expenses, most of their income is used for discretionary purposes. This often leads to developing a taste for luxuries such as expensive coffee and clothing.

But when these young people move out to attend school, they suddenly find that their income barely covers their basic expenses – let alone luxuries.

They don’t want to start living like a pauper, but their income barely covers the necessities of life. But they have credit cards and they can put luxuries on the credit cards and then make the minimum payments. They are able to go out and they are able to enjoy things.

The minimum payment system as “a big trap” that encourages consumers to hold on to debt to create profit for credit card companies.

 Read the full Financial Post Article here

In my son’s case he didn’t even make it on campus. We went to our local bank to change his youth account to a regular account and left with a credit card that “came with the account.”

Parents you know your child’s money personality and therefore, you, not a bank, should determine if your 18 year old is mature enough for a credit card.

Financing your University Education

Last week the university tuition fee report was released by Statistics Canada and as expected tuition fees have increased. There was an overall increase of 4.3% in tuition in 2011 following a similar increase in 2010. By comparison, inflation was only 2.7% between July 2010 and July 2011. Will tuition continue to increase at a similar rate? If you or your child will start university in 2012, here’s what you might expect to pay for a four year degree:

·       2012      $5581

·       2013      $5804

·       2014      $6036

·       2015      $6277

Note, however, there are provincial differences. Ontario and New Brunswick have the highest tuition; while Quebec and Newfoundland & Labrador have the lowest. Also, Quebec and Nova Scotia charge higher tuition for out of province students. A third consideration is that some programs, like Bachelor of Commerce and Bachelor of Business Administration degrees have higher tuition than other undergraduate degrees at the same university.

Remember that tuition is only one part of university expenses. You need to include:

·       Textbooks (approximately $1500-2000 per year)

·       Transportation (daily transportation/parking cost if living off campus and/or trips home if off campus)

·       Residence (roughly $5000).Dormitory fees are not correlated to the real estate market the university is located in. Living off campus is sometimes a cheaper option, but I don’t recommend it in first year.

·       Meals (don’t assume that your child who is living at home won’t need money for meals on campus). Meal plans are not what you expect. It’s essentially money that’s deposited upfront that the student can then use at all the various eateries on campus (who sell food at regular prices) and in some cases at local restaurants. It would be helpful if you can and are willing to cook. Note today’s other post about the increase number of Food Banks on college and universities campuses.

·       Entertainment expenses ($1000) but depends on some your entertainment preferences. There are lots of free and cheap fun options on campus.

·       Miscellaneous expenses. My son paid $300 for intramural hockey and $70 for his residence social fee.

I would recommend that you estimate at least $9,500 per year for a student living at home and approximately $17,000 each year for one living on campus or away from home.

So how does one finance a post-secondary education? The most obvious options are:

·       Personal resources from your years of savings. Don’t worry if you haven’t started yet, it’s never too late and every bit helps. Monetary birthday and Christmas gifts from family would be helpful; gently get the word out.

·       Provincial and Canada student loans (see websites to your right). You may be able to get an estimate of the value of the loan you qualify for, if any.

·       Student Line of credit with a bank (see websites on your right). Shop around and read the fine print.

·       Scholarships – Many are offered without an application and are sometimes offered simply as a result of achieving a minimum high school average.  There are also a number which you must submit an application. Do take the time to research the various types of scholarships available, often the number of applications is lower than you expect so apply even if you think that you don’t have a chance. Pay attention to the wording of the scholarship. Some are only offered in first year, while others are renewal automatically or with some conditions. This becomes important when comparing offers from different universities. Your best friend should be the university financial aid officer.

·       Bursaries are usually offered based on financial needs not on academic merit. Generally, you will have to demonstrate financial need by applying for a provincial student loan. Sometimes the application forms are a bit daunting but it’s worth it if you need additional funds. Many students who qualify don’t apply, so often there’s more money than demand.  Again, your best friend is your university’s financial aid officer.

·       Work Study Programs. These programs offer jobs on campus for a certain number of hours to students who have unmet financial needs.  Again, financial need is usually based on your provincial loan application. Many of these jobs are not filled do should consider applying.

·       Be creative; think outside the box of other ways to finance your education. My son had a garage sale and sold items on craigslist and Kijiji.

In summary, a university education is a sound investment in your future. While you need to focus on the cost, you’ll likely need multiple sources of funding to cover the cost. Financial help is available you just need to find and apply for it!

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