“In Canada, labour outcomes for earned doctorates have remained steady over the past 15 years, absorbing the almost doubling of PhD degrees over the same time period into diverse careers. Even so, the percentage of the Canadian population holding a PhD lags other member countries of the Organization for Economic Co-operation and Development. We are not keeping pace with the talent pool needed to drive innovation, creativity and social/cultural advancement.” So writes Brenda Brouwer, president of the Canadian Association for Graduate Studies and vice-provost and dean of graduate studies at Queen’s University, in a commentary in the Globe and Mail last March.
In the current situation, we are apparently asking graduate students to pay back their student debt as quickly as they can and pay line of credit interest rates. If that same individual was in the workforce and applied for a mortgage to buy a house, she or he would have up to 25 years to repay the debt and would be charged current mortgage rates.
The ability of university students to finance their studies is inhibiting the choices they make about investing in postgraduate studies. If postgraduate students could obtain mortgage financing for their pursuit of a master’s or doctorate in their chosen field, their financing difficulties would be alleviated. Universities would be enriched by the ability of any qualified candidate to pursue their studies, and Canada would be enriched by the graduation of the best possible master’s and doctoral students.
It is intriguing to consider the different job prospects that master’s and PhD graduates have today, dependent on the area of study that they pursued, and how their education and career choices are being impacted by the funding available. Anecdotally, it has been suggested that financial considerations are at the heart of inhibiting master’s students from pursuing doctorates. But, most interesting is the thought that maybe at the master’s and doctoral level we could facilitate allowing the individual the choice to choose whatever field of study interested them – a truly student-centric funding model.
Mortgage financing of postgraduate education requires a federal corporation like Canada Mortgage and Housing that would guarantee the student debt and collect insurance premiums on that debt to ensure that Canadian financial institutions can provide student loans at affordable interest rates with a manageable repayment schedule. The proposed mortgage financing would be an enhancement of the existing student loan system, would not have a means test, and would encourage and empower university graduates to pursue postgraduate studies. This initiative would be complementary to the plethora of initiatives aimed at making university accessible to all, but is one that empowers the individual postgraduate student.
To that end, I propose that the Canada Graduate Loan Corporation be established along the following lines:
Mission statement: To facilitate postgraduate education through the provision of financing for master’s and doctoral studies at Canadian universities through the granting of insurance on mortgage-style loans.
Qualifying students: Any student who is currently in, or has been accepted into, a Canadian university master’s or doctoral program of study will be eligible. Any graduate holding a master’s or doctoral degree may apply for conversion of their outstanding student debt to a CGLC loan.
Loan limitations: A qualifying student may apply for a loan up to the combination of the yearly tuition fees and $24,000 per year living expenses. No means tests will apply.
Loan providers: All financial institutions, governments and universities qualified as providers of student loans will be the source of funding for CGLF loans.
Loan insurance: The loan providers will obtain default insurance from CGLC by paying the current insurance premium to CGLC. This fee will be built into the repayment schedule established for each CGLC loan.
Canada Revenue Agency notification: CRA will be notified of the details of each CGLC loan.
Loan repayment: Each loan will be established on a mortgage-style repayment schedule spread over 25 years.
Early repayment: The CGLC loan may be repaid at any time in whole or in part.
Loan default: Any default on a loan will be reported to CRA and will be considered a tax payable to Canada.
Rapley Bunting is a retired corporative senior manager. He lives in London, Ontario.
Why a mortgage loan and not a much more preferable income contingent loan, such as has been introduced in Australia, Aotearoa New Zealand, the UK and many other countries? Repayments of income contingent loans vary according to borrowers’ income, thus smoothing out income fluctuations.
Chapman, Bruce (2006) Government managing risk: income contingent loans for social and economic progress, Routledge, Oxford.
Why not simply tax the rich, make higher education free, and not saddle younger generations with mortgage-sized loans for the rest of their lives? It’s absurd to concoct more ways of giving more debt to young people, while the rich continue to use tax havens and generous tax rates to exploit the rest of us. Canadian individuals and corporations put $40 billion into tax havens last year (https://www.thestar.com/news/canada/2016/04/27/canadians-put-40-billion-in-tax-havens-last-year.html). Canada also has the lowest corporate tax rate in the G8 (http://www.winnipegfreepress.com/business/canadas-corporate-tax-lowest-in-g8-study-finds-139271258.html). A fraction of this money could easily fund more PhD students, not to mention reduce tuition fees across the board for post-secondary students. Stop ignoring the capitalist elephant in the room.