UCRU recommends eliminating tuition tax credits

Student union collective proposes the reallocation of $1.5 billion towards student loan programs

Photo by Megan Colwell.

A report prepared by Undergraduates of Canadian Research-Intensive Universities (UCRU) recommends that the federal government scrap the federal tuition tax credits moving into 2018.

The UCRU is a collective of undergraduate student unions representing students of research intensive universities.

The recommendation calls on the federal government to scrap the Tuition Tax Credit and reallocate an estimated $1.5 billion toward upfront grants and loans.

Tuition tax credits allow post-secondary students to claim a tax reduction for tuition fees paid each year. The credit is calculated by multiplying tuition fees by the federal tax rate – which is currently 15 per cent. Universities and colleges annually issue statements to their students revealing the exact sum they may claim under the non-refundable credit.

The credit aims to both increase postsecondary enrolment and lessen the burden of tuition fees on students, specifically those coming from low-income families. Any student over the age of 16 attending an accredited institution with fees exceeding $100 can claim these credits.

With its current structure, any credit left unclaimed by a student can be transferred to their parents, grandparents, or spouse. Further, a provision introduced in the 1997 federal budget allowed any unused credit to be carried forward to the next year.

Logistic deficiencies

A study published by the C.D. Howe Institute in 2013 reveals that on a yearly average, only one-third of government investments into tuition credits go directly toward students. The remainder is claimed by supporting individuals.

In the report, Wilfrid Laurier University’s associate professor of economics Christine Neill emphasized that the main concern with tuition tax credits is that they do not meet their objective of boosting the number of Canadians with a post-secondary education and providing adequate financial aid all students in need.

As outlined in UCRU’s report, only $500 million of the projected $1.5 billion tuition tax credits will go to students in 2018.

The benefits of tax credits only come in the spring following the payment of tuition bills, when tax returns are filed. A policy of the Canadian Federation of Students (CFS) points out that this nearly nine month lapse means that tuition credits have minimal impact in reducing the upfront costs of post-secondary education.

Furthermore, given that university enrolment rate for students from high-income backgrounds are almost twice that of students from lower-income families, the average tax credit claimed by students from the top quartile is twice that of the average credit available for students in the bottom quartile.

For these reasons, the UCRU report suggests that tuition tax credits disproportionately benefit students coming from higher-income families, and not those who are more in need of government aid.

“In order to derive any benefit from the education tax credits, students and their families must first find the resources to pay for tuition fees, textbooks and living expenses and hope that a portion will be refunded sometime in the future,” reads the CFS policy statement.

“As a result, education tax credits are most likely to benefit those who already have enough money to afford post-secondary education.”

Canada Student Loans Program

The federal government has a variety of programs that help reduce tuition costs by providing subsidies to students attending post-secondary institutions. These programs assist students through upfront loans that are repayable after graduation and non-repayable grants. At the forefront of these programs is the Canada Student Loans Program (CSLP).

The most recent review of CSLP, dealing with the 2014/15 fiscal year, revealed that 83 per cent of the $717.7 million distributed to approximately 366,000 students was provided to students from the lower quartiles.

At the University of Manitoba, the Front and Centre Campaign is aiming to raise $75 million toward scholarships and bursaries and enhance support for Indigenous and graduate students, research, and student experience, among other items.

Under UMSU president Tanjit Nagra, the student union has committed $15.9 million to the campaign. This 10-year commitment has helped in the creation of over 340 new student scholarships and bursaries.

“These contributions will go a long way in making post-secondary education more accessible by decreasing the financial barrier that many students face,” Nagra said.

Moving forward

Another report prepared by Neill, for the Canada Millennium Scholarship Foundation, jives with the recommendation outlined in UCRU’s report.

Neill emphasizes the better role programs like CSLP can play in regards to higher enrolment rates and better access to financial aid by pointing out directions that could be followed.

The first is through increasing grants. Government grants are the largest source of funding for universities and colleges, and yet they only account for 54 per cent of government education spending. An increase in grants would enable an expansion of the post-secondary system and can therefore help heighten student enrolment.

If the financial resources committed to tuition tax credits were to be reallocated towards direct student grants, each post-secondary student could receive $1,100 annually.