Loans fail to aid the poor

August 11, 2006

Canada's desire to make university tuition fees more affordable is diverting money from targeted programmes that could better attract low-income students, a financial aid think-tank says.

The Toronto-based Educational Policy Institute found recent increases in eligibility for student loans, as well as tuition-fee freezes in most provinces, did little to increase access and were more a lure for the middle-class vote than a strategy to widen access.

In a report the EPI says the combination of not raising fees, widening eligibility for student loans and offering tax relief for some study expenses results in lopsided help.

Report authors Sean Junor and Alex Usher write that these moves have "little to do with good public policy and more to do with cheap electoral politics".

Their paper claims that the cost of providing universal benefits is approaching C$4 billion (£1.9 billion) a year and says the money goes primarily to help those at the wealthier end of the spectrum. It says that only 17 per cent of available funds go to students from the lowest income quartile, with close to 35 per cent going to students from the highest income quartile.

"Nationwide, politicians are squeezing needs-based grants to pay for tax credits and tuition freezes," Mr Usher said.

Quebec is cited in the report as the worst offender, after attempting in 2004 to convert C$103 million in needs-based grants into loans.

The paper describes a financial aid system under further pressure from rising interest rates and the loss from 2009 of C$350 million in student bursaries from the Canada Millennium Scholarship Foundation as it reaches the end of its ten-year life span.

As a result, the paper predicts an C$800-million shortfall in the financial aid system by 2010.

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