Misallocation of Funds Not in Students’ Interests

Special IssueHenry Gass — Published November 8, 2011

Henry Gass—
The Mcgill Daily

As tuition steadily increases, both the Quebec and Canadian governments are doing little to bolster student aid programs, with private and political interests converging at the expense of mounting student debt.

According to Students’ Society of McGill University VP External Joël Pedneault, “There’s no way to justify the current financial aid system in Quebec.”

Pedneault argued the structure of Quebec’s Aide financière aux études leads to the misallocation of millions of dollars of student aid.

Quebec students paying in-province tuition are eligible to take out loans from private banks and credit unions and have the Quebec government pay all interest on the loan until six months after the student’s graduation.

“A huge chunk of the financial aid budget goes straight to banks, and when you think that the government could just be allocating that money straight towards universities to, for instance, lower tuition fees—which would mean that students would actually incur less debt—well, that means they wouldn’t have to incur interest payments,” said Pedneault.

According to a October 2009 study conducted by the Institut de recherche et d’informations socio-économiques, in the 2007-2008 fiscal year the Quebec government spent 45 per cent of the AFE budget on interest payments to the tune of $79.6 million.

Pedneault added that a large portion Quebec’s promised $118 million “reinvestment” in financial aid will come from new tuition revenue paid by students, 35 per cent of which the government is committing to financial aid.

The Quebec government’s 2011-12 budget states, “Students must shoulder their fair share of the effort made in regard to university education. In addition, it is essential for the government that the implementation of the funding plan does not jeopardize students’ access to a university education.”

A Fédération étudiante universitaire du Québec report published last month revealed that students will be financing 98 per cent of the government “reinvestment” by 2018, when this round of tuition hikes ends.

In turn, the report claims that Quebec’s total contribution to the financial aid budget will drop from roughly 48 per cent in 2010 to around seven per cent in 2018.

“The provincial government is currently trying to withdraw funding from the [AFE], as it preaches the importance of an educated population for the future of Quebec,” stated the FEUQ report in French.

Another financial aid situation unfolding at the federal level involves the $15 billion ceiling set by the Canada Student Financial Assistance Act, which dictates how much money the federal government is allowed to distribute in loans to students.

According to Canadian Federation of Students National Chairperson Roxanne Dubois, the government did not expect to reach the ceiling until at least 2016. She said the expected date for passing the ceiling is now January 2013.

“It can only be assumed that some changes are coming down the pipes to the [act],” she said.

Dubois described three possible changes to the act: the cap could be increased, it could be removed, or the federal government could stop giving out student loans altogether. She said students would carry most of the cost for each option.

“If we’re no longer giving out loans, […] fewer students will be able to have access to that help to pay for their tuition fees,” said Dubois.

“We also have to think about the impacts of increasing the ceiling, lifting or removing the ceiling, because that money eventually is just passed on to the backs of students in the form of student debt,” she said.

In an email to The McGill Daily, a spokesperson from Human Resources and Skills Development Canada stated that, “The Government of Canada will ensure that students continue to have full access to student loans, now and into the future.”

The representative stated in October that regulation of the lending portfolio, as opposed to legislation, provides greater flexibility and makes it easier for the government to ensure students will have full access to loans.

One solution—the Canadian Post-Secondary Education Act—is currently being debated in the House of Commons.

“We would see [that act] as a framework that would give the federal government some guidelines as to where the provincial governments should invest the money that’s going to education, to prevent cuts to education from the provinces, and to ensure that we reduce tuition fees.”

Dubois added she saw tuition fees as “the main barrier” to post-secondary education. “It’s reason number one why people may decide not to pursue their [university] degree.”
Both FEUQ and Pedneault claim that the province’s recent allocation of federal funds relating to the termination of Ottawa’s Millenial Scholarships Program in January 2010 is contributing to its withdrawal of AFE funding.

The federal government’s decision entitled Quebec to $70 million annually from the federal government. According to the same FEUQ report, however, the Quebec government has yet to allocate the funds directly to financial aid.

“The government’s refusal to allocate the additional money paid by the federal government […] has the effect of reducing its own contribution” to the AFE, stated the FEUQ report.

In an email to The Daily, a spokesperson from Human Resources and Skills Development Canada wrote that, “Since the province operates its own program, independent of the federal government, it is fully accountable for its spending.”