Helping kids pay for college

2011-04-26

in Canada, Economics, Politics

These days, it seems like having a university degree is the equivalent of having a high school diploma in previous generations – it is simply the requirement in order to even be considered for most professional jobs.

At the same time, university is expensive and comes at a time when people do not have savings or earnings of their own. For many people, the late teens and twenties will be the poorest time in their life, as they are no longer fully provided for by parents but cannot yet get jobs good enough to let them live in comfort. In most cases, they definitely cannot get jobs that pay the cost of living and university tuition, while not requiring so much time and commitment that it undermines their ability to study and benefit from school.

A case can be made that people who choose to have children have some level of moral obligation to help pay for university, in the event that their kids can get in and want to go. Providing such a transfer of wealth to one’s children could help set them on a good path for their entire life. It provides a useful qualification, as well as a key venue to meet future friends, allies, and potential spouses. It is enormously more useful than a lump-sum inheritance received much later in life, when their personal trajectory will already have been basically established. You will also be contributing to the development of an educated and productive populace.

People who themselves went to college probably have a bit more of an obligation to provide a similar opportunity, especially if they received financial help from their own parents. Even for those who didn’t, it is worth bearing in mind that school used to cost a lot less, so people going today have more need for help.

An obligation to help pay for university adds significantly to the total cost of having children, but nobody should be under the illusion that doing so will be cheap. If you don’t feel inclined to invest significantly in your children, my recommendation would be getting a couple of friendly dogs instead.

On a semi-related note, university education is also a smart thing to consider when choosing a spouse. There seems to be a lot of evidence that the more educated a person’s mother is, the better they are likely to do in school, work, and life generally.

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{ 34 comments… read them below or add one }

anon April 26, 2011 at 11:32 pm

Most people don’t have university degrees and aren’t eligible for professional jobs. There are only enough professional jobs for a small minority of citizens, and citizenship is itself a huge privilege compared to the working conditions of temporary workers which make up an increasing portion of the Canadian workforce.

Milan April 27, 2011 at 8:10 am

I think it may be a fallacy to say that there are a set number of professional jobs. The number of jobs depends on the productivity of the workforce. As long as it remains profitable for a firm to hire more employees, it is economically rational for them to keep doing so.

By improving the skills of the general population – specifically the skills required for ‘professional’ work – it seems to me that the proportion of the population with such jobs could be increased.

alena April 27, 2011 at 5:01 pm

I do not agree that it is a responsibility of parents to provide the money for a university education. I think that most parents want to help their children financially as best as they can, but in many cases it is not a worth while investment. First of all, not everyone can or wants to go to university. For many people there are better options for a fulfilling life than a university degree. People with trades and business skills are often very successful. The second reason is that a person who goes to university needs to feel that s/he has made this a priority and is willing to study as well as contribute through paid work. University education is a privilege and there are too many people who see it as something that they are entitled to and can slack off at at the same time. It has to be looked at on an individual case basis. It has been my experience that parents whose children have done well in university have no regrets about helping to the best of their capability and financial situation.

Milan April 27, 2011 at 6:27 pm

I don’t agree.

Someone who is planning to have a child today should also be planning out how they will provide substantial assistance for post-secondary education. Otherwise, you are basically bringing someone into the world and then putting them at a disadvantage.

There are all kinds of reasons why having children is an onerous burden, but children themselves have the right to a fair shot at success. In Canada today, having a fair shot at success requires having access to university.

Matt April 27, 2011 at 6:39 pm

I don’t know, I don’t really agree with the premise that adult children are owed anything (although I acknowledge my substantial parental support).

Parents have an obligation, certainly, to clothe, house and feed their children and raise them to adulthood, but I don’t think it’s true that they have any obligation to educate them such that they are suitable for upper tiered jobs. At some point, a person is responsible for themselves.

Milan April 27, 2011 at 6:41 pm

I don’t think that point arrives when they are 17 or 18, given that university is now expected for most good jobs. Heading out into the world with a high school diploma and nothing more isn’t likely to lead to a very satisfying working life.

Anonymous April 27, 2011 at 6:51 pm

Is this another way of saying that people who do not attend university do not get a fair chance in life?

alena April 28, 2011 at 12:57 am

I do not think that having children is an “onerous burden,” but rather a great journey of love and learning. There are many things that parents must provide for their children, but a university education is a generous gift and not an obligation.

Ryan Nassichuk April 28, 2011 at 12:45 pm

The days of the ‘have to go to university to be a success’ mindset will soon end. Over the past several generations, more and more people have been going to university. The cost of a university education has been going up to reflect this demand and the notion that ‘if I don’t go I’ll never make any money and won’t find a wife and will never achieve any real success’.

For many jobs, a bachelor’s degree is no longer enough, and one must go back for a masters. Meanwhile, much of our economy is about to begin shutting down permanently (peak oil), and a dangerously large fraction of the remaining high-paying, sit-at-a-desk-with-a-computer type of jogs can still be outsourced to cheaper degree-holders overseas.

On a personal note, leaving university to pursue a career that really interested me was the best decision I ever made.

Milan April 28, 2011 at 12:55 pm

Good points

I did specify that the obligation exists “in the event that their kids can get in and want to go”.

Some people have better options, or other preferences.

Tristan April 28, 2011 at 4:18 pm

If people believe we live in a capitalist society, and that the money spent on University is a capital investment in children, then they should also consider alternative capital investments that their children could access if university is not right for them, i.e. a significant amount of capital with which they could start a business or become a partner in a business in their early 20s.

There have been proposals made to give every 18 year old through a taxation and redistribution scheme a significant amount of capital – money they could use either to go to school or to start a business.

It’s not an awful idea – if one subscribes to capitalist logic concerning the production of wealth, it does not follow that one must subscribe to the dogma that a person holding wealth will invest it more efficiently than someone else to whom it could be re-allocated through a redistributive tax.

Also, it takes the burden off individual parents, increasing parity between children of parents with different levels of privilege and levels of willingness to pass that privilege on. However, it remains within the paradigm that holds that the individual pursuit of maximum wealth is the driving force behind a good society.

Milan April 28, 2011 at 5:48 pm

The fairness problem here is somewhat tricky.

Having children is a choice parents make, and they should pay most or all of the associated costs.

At the same time, kids do not ask to be born and do not deserve to suffer because their parents do not want to provide for them.

When you consider all the alternative policies that could exist, the moral questions become very large and complex. Given the world as it exists now, however, I believe parents should be prepared to help their children financially so that they can go to university and that parents are at least somewhat remiss in their moral obligations if they do not.

Matt April 28, 2011 at 6:37 pm

Having children is a choice parents make…

Very, very commonly children are accidents and so the above statement isn’t totally true. Often people become parents who aren’t financially able to send their kids to University. It may not be fair to the children, but there’s not much guarantee of fairness in the universe.

In Canada, there are many ways for people to pay for their education if they are willing to take on debt to do so.

Tristan April 28, 2011 at 7:20 pm

Parents also have the option of organizing and pressuring the state to restore 1990s level tuition rates. They can do so in their places of business by forming unions, and by forming community groups which can by building consensus increase the power of their voices on particular issues like this one.

Milan April 28, 2011 at 7:26 pm

Very, very commonly children are accidents and so the above statement isn’t totally true.

If you don’t want children, use both a condom and hormonal birth control when having sex. If the condom breaks, use the morning after pill. If all that fails, abortions are freely available in Canada.

If you don’t believe in contraception, then you can either choose to remain abstinent (at least as far as heterosexual genital-genital sex between fertile partners goes) or accept the risk that your choices could produce a child for which you will be morally and legally responsible.

Similarly, if the woman choosing to have heterosexual genital-genital sex between fertile partners doesn’t believe in abortion, both partners should accept the risk that their choices could produce a child for which they will be morally and legally responsible.

Milan April 28, 2011 at 7:31 pm

Part of that risk is that you may someday need to spend hundreds or even thousands of dollars so that a middle-aged man in a tweed jacket can talk to your child about Foucault.

alena April 28, 2011 at 7:40 pm

I think that having a child is also a gift to the world; without children, there would be much less joy and potential in this world. Children are not these totally dependent anchors weighing down their parents. Many young people are independent and creative in financing their schooling. I agree with Matt that most people in Canada can go to university even if their parents are not wealthy. there are scholarships, loans and jobs on campus. People can go to community colleges or get help with tuition from their companies. Help from parents and grandparents is also a nice gesture.

BuddyRich April 28, 2011 at 9:59 pm

And yet our pyramid scheme of a capitalist society practically requires a greater population than the generation preceding it to fund pensions, healthcare and other standards of living which we currently take for granted. Not even monetarily, just age-wise, physiology dictates some work requires younger individuals to ensure a functioning society. Its almost a symbiotic relationship really. Parents look after the young for a reciprocal duty of a child looking after aged parents when they inevitably become infirm.

Looking at it from the selfish angle, if parents want a comfortable retirement one way (of many) they can help ensure that is by giving their offspring the best head-start possible. I wouldn’t go so far as to call it an obligation for a parent, but it is certainly in their own self-interest to do so.

Also, as it is something of my work specialty, Canada offers an advantageous savings vehicle, the RESP, that encourage saving for one’s offspring’s future educational needs via tax deferral (and matching grant and bond amounts depending on income levels of the parents) that also appeal to a parent’s selfish desires for greater after-tax disposable income, and in some cases, free money from the government. Also this money need not be tied to a university degree; it can also be spent on an accredited red seal trade school and a variety of other qualifying programs, or rolled into an RRSP (though with a tax hit at that point). It can even be passed on to a younger sibling.

Ryan April 28, 2011 at 10:32 pm

Milan – This post got lots of interesting comments, which veered into various controversial directions. I would like to see more posts about some of this stuff, particularly the ethics of having/not having children. I expect others would as well.

Of course the planet doesn’t want us to make any more children, but it is interesting to note how many people still feel human reproduction is a good idea. Plenty of room for debate.

Also, this sentence is genius:

“Part of that risk is that you may someday need to spend hundreds or even thousands of dollars so that a middle-aged man in a tweed jacket can talk to your child about Foucault.”

Also, “heterosexual genital-genital sex between fertile partners” will now be wording I use when suggesting sex to my girlfriend. Something about that phrase is so…poetic.

Keep up the good work.

Milan April 29, 2011 at 12:07 am

When people say “sex” it is usually assumed they mean “heterosexual genital-genital sex between fertile partners”.

Of course, that is just one type among many, and one that carries a unique risk.

alena April 30, 2011 at 3:48 am

The element that is missing in this discussion is acknowledgement that in Canada most direct costs of education at every level, including university, are paid for by the government, ie, tax dollars.

The question is who should pay for the rest.

Up to the end of high school in the public system, the vast majority of the direct costs are paid for by the state, ie the taxpayer. There are excellent social reasons for this which I support.

After high school this changes. It co-incides with a transition from childhood to adulthood. In the former the person is largely supported by others. In adulthood, a basic expectation is supporting one-self.

As part of that transition, I believe that an individual should primarily be prepared to pay most of that difference. Quite naturally, parents are generally prepared to help.

In summary, I would support the status quo with one exception – the lack of acknowledgement that most support for the direct costs of education come from the taxpayer. I continue to support the status quo that most direct costs of an university education are paid for by tax payers. I simply suggest that that fact be recognized.

oleh April 30, 2011 at 3:50 am

The last entry came from me, not alena.

zoom May 1, 2011 at 7:50 am

University ought to be affordable in the first place.

oleh May 1, 2011 at 9:49 am

I did a quick internet search to see if I could find out the percentage cost of university covered by tuition. The Ontario Undergraduate Student Alliance reports that for 1009-2010 in Ontario tuition covered 40.8% ( the second highest among the provinces) of the costs. The average tuition was $5951. IN British Columbia it was 39.7%.

I provide this as information not advocacy.

There seems no issue to me that university education should be to some degree subsidized by the government for all kinds of social reasons. The subsidies were much higher in the past three decades.

What I have not determined for myself is whether the current 60% subsidy is too high or too low. 60% seems about right as a transition from basically 100% subsidy in elementary and secondary education.

. May 2, 2011 at 6:21 pm

Paying for higher education
Race to the top
Why tuition fees are soaring and what to do about it

THE unseemly scramble by most English universities to raise annual tuition fees to the maximum level permitted by the state, £9,000 ($14,500) from September 2012, is a headache for the coalition government. Not only does it make university education in England as expensive as in America, a burden that will in many cases be borne by the taxpayer, but it also seems to rule out creating a genuine market in higher education, with institutions competing on price. Ministers had thought that universities charging the top whack would be exceptional. Alas, when they submitted their final plans on April 19th, it was clear that most had aimed high.

Under the government scheme put forward last year, English undergraduates will borrow from the state at modest interest rates to cover the costs of their tuition, repaying the debt once they have graduated and are earning more than £21,000 a year. Ministers expect that 30% of the money lent will never be repaid. Asking all taxpayers to fund what only some consume has pernicious effects: it drives up demand for higher education even when prices become eye-watering. In England tuition fees will have risen almost seven-fold over the decade to 2012, yet demand so far has robustly outstripped supply. What can be learned from experience elsewhere?

Milan May 2, 2011 at 6:27 pm

I did a quick internet search to see if I could find out the percentage cost of university covered by tuition.

The percentage covered may not be all that significant, ethically.

If university education is generally necessary to prosper, and most young people have trouble affording it, parents may have a moral obligation to help, even if university costs are already being subsidized to some degree by the state.

oleh May 4, 2011 at 2:26 am

I don’t think a university education is necessary to prosper. Learning a trade can be the path to a rewarding and prosperous life. I believe some post-secondary education or training is very important. I also agree that in most cases parents should be prepared to help. That help can come in continuing to provide food and shelter as well as a contribution towards the tuition.

The student, who shortly after graduating high school is an adult, should also be contributing. I realize that at that age, it can be difficult to find well-paid jobs. That is where student loans can step in to help students fund the investment in their training and education of which they will become the primary beneficiaries.

mek May 8, 2011 at 7:15 pm

I would just like to add my experience in BC as a part-time self-employed full-time student. When doing my tax returns, I was shocked to discover that I owed the government $600; because I was attending school full-time I was not entitled to the basic Working Income Tax Credit, and the $2500 education tax credit was non-refundable and could not be applied to CPP. In short, I found that as a poor student with no money I had a $3500 debt to the CSL and a $600 debt to the government.

However, I can transfer that education tax credit, which is absolutely worthless to me, to my wealthy parents. They get the full $2500 credit off their tax return and can cut me a cheque which will cover more than half of my current debt.

The reality of the system in BC is that it favours the wealthy and adds debt load to those who are already poor.

oleh May 8, 2011 at 11:30 pm

“The reality of the system in BC is that it favours the wealthy and adds debt load to those who are already poor.”

I do not see the poverty of university students in the same way as the entrenched poverty of poor people.

Mek, it seems that one of your concerns is that you incurred a “$600 debt” to the government. That “debt” to the government is simply income tax. I expect your wealthy parents paid more in taxes than you did.

Income tax is the main means by which schools are funded. The wealthy pay more income tax (in gross volume and proportionately) than the poor.

As someone who pays tax or in effect or has a “debt” to the government, I am not complaining. However, I am also not impressed by the laments of poverty of post-secondary students who are obtaining post-secondary education:
1. mostly funded by the working taxpayer and
2. are likely to have the most benefit, including financial benefit, from that education funded mostly by the taxpayer.

mek May 9, 2011 at 12:25 am

My point is simply that with a $10k income, a 3.5k debt on $7k tuition paid, I have to pay CPP 600 dollars and am given a tuition tax credit which is worth exactly zero dollars to me. Literally nothing – this tuition tax credit pays NOTHING to low-income students, because it is non-refundable! If you’re poor, it may as well not exist. If I had a $18k income and didn’t pay tuition, I would receive money back from the government via WITB.

But if I am lucky enough to have the safety net of rich parents, they gain a substantial financial benefit for having me in school, even if I am working through it myself. I can’t understand these policies as having any rational basis.

anon May 9, 2011 at 5:15 am

“I do not see the poverty of university students in the same way as the entrenched poverty of poor people.”

Whether a university student is “entrenched in poverty” is a fact that depends on a lot more than them simply being a university student. It depends on the family they come from, and to some extent their larger community or social network. It also might depend on what they are studying, and on the job market for people in their field of training and on the job market more generally.

anon May 9, 2011 at 5:16 am

“I can’t understand these policies as having any rational basis.”

The rational basis is to benefit those who’s interests politiciens act. Those in this position have a rational interest in obscuring the political entrenchment of their own privilege, but it is no less real for their rhetoric.

oleh May 10, 2011 at 5:04 am

Mek, I am impressed that you earned $10K while being a full-time student. It certainly helps pay for your living expenses, although without the present subsidy of education would not help much on tuition. n.

From your earlier comments I was not aware that your $600 debt was for CPP benefits as opposed to the payment of taxes.

Your situation is one which illustrates how the present system is both for the benefit of students and poor people.

On the tax side, you earn $10K in income. It would appear you are not required to pay any taxes. If we were in a system of equal flat taxation that would not occur. For example, if we had a flat income tax of 20%, you would pay $2K in tax. In a flat tax system 20% is basically the sustainable rate.

On the expenditure side, if you pay $7K in tax and the tuition covers 40% of the operating costs of the education, you are a further beneficiary of $10.5 K.

I also expect that the government also pays the interest on your $3.5K student loan until 6 months after you graduate. Assume that is a period of 2 years, at 5% that amount equals $365 (or about $175 per year. If your loan goes higher in the future, this subsidy goes higher.

Therefore based on those two factors alone, under the present system you are the net beneficiary of $12.675 per year.

You would also be the beneficiary of other government funded programs which we are all.

In summary, your example is one where society has decided to heavily subsidize the university student. The subsidies are primarily provided by wealthy people and corporations.

I am not saying that this is bad. I agree with the present system of heavy subsidies to university students. I am simply puzzled that university students do not recognize the extent to which they are subsidized.

One of the reasons I support this degree of subsidy is that it makes university education much more affordable to people from poorer economic backgrounds. Although it may be that your wealthy parents could afford the approximately $17.5 K tuition if the tuition was not subsidized, the parents of poorer students could not.

PS. The $600 debt you refer seems to be a $600 premium for CPP. CPP is designed to be a self funded pension system. In your case, it equals 6% of your income. which would be in the expected range of contribution in pension systems.

. May 10, 2011 at 6:49 pm

“To the extent that emotions among people reflect their typical genetic relatedness, Trivers argued, the members of a family should disagree on how parental investment should be divvied up. Parents should want to split their inevestment equitably among the children – if not in absolutely equal parts, then according to each child’s ability to prosper from the investment. But each child should want the parent to dole out twice as much investment to himself or herself as to a sibling, because children share half their genes with each full sibling but share all their genes with themselves… Of course, it’s not that parents and children literally fight over pie or milk or inheritances (though they may), and they certainly don’t fight over genes. In our evolutionary history, parental investment affected a child’s survival, which affected the probability that the genes for various familial emotions in parents and in children would have passed on to us today. The prediction is that family members’ expectations of one another are not perfectly in sync.”

Pinker, Steven. The Blank Slate: The Modern Denial of Human Nature. p.248 (paperback)

“Fetuses tap their mothers’ bloodstreams to mine the most nutrients
possible from her body, while the mother’s body resists to keep it in
good shape for future children.”

p.248

“Natural selection should have equipped children with psychological tactics allowing them to hold their own in a struggle with their parents, with neither party having a permanent upper hand. Parents have a short-lived advantage in sheer brawn, but children can fight back by being cute, whining, throwing tantrums, pulling guilt trips, tormenting their siblings, getting between their parents, and holding themselves hostage with the threat of self-destructive behaviour.”

p.249

“The offspring cannot rely on its parents for disinterested guidance. One expects the offspring to be preprogrammed to resist some parental manipulation while being open to other forms. When the parent imposes an arbitrary system of reinforcement (punishment and reward) in order to manipulate the offspring to act against its own best interests, selection will favor offspring that resist such schedules of reinforcement.”

p.249

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