Are tuition fee reductions a subsidy for the rich?

Alex Usher on Dale Kirby's PSE blog has written some pretty interesting things about tuition.

We all can agree that tuition, especially at UNB is way too high and that it should probably at the very least come down to the national average which is around 4500, and that's just for starters. I would go further than the freeze that is already in place and start reducing tuition fees until they are zero. Critics say it can't be done, but that's the same thing critics said about a proposed health care system back in the '40s, '50s, and '60s, that it could not be done. At the very least, most can agree that tuition is too high and needs to come down.

However, Alex Usher from the Educational Policy Institute (one of those private think-tanks based out of the United States) has a different take on the issue. He believes that tuition decreases are regressive subsidies for wealthy students and because of this, decreases should be avoided. To be fair, Usher and EPI appear to advocate for student aid to be directed at low-income students in order to relieve the burden. Part of his argument rests on the fact that most low-income youth do not go to university and that the bulk of students in universities are wealthy/upper-middle-class students who would benefit the most from tuition decreases.

Well why would that be today? It could be b/c most low-income students cannot afford university and are too debt-averse to take student loans. We also know that during the 1960s and 1970s when tuition levels were frozen for many years, this changed the demographics of our campuses and for the first time in our country's history, people with working-class backgrounds went to university. So there is strong historical evidence to suggest that tuition decreases increase participation of low-income youth who can benefit from University the most. Unfortunately Usher's argument conveniently over-looks this.

And just to remind you who Alex Usher is, for those who don't know. He is one of the founding members of the Canadian Alliance of Student Associations who went on to work for the Canadian Millennium Scholarship Foundation and then moved to the EPI. CASA sided with the Liberals on Income Contingent Loan Repayment which was a serious proposal in 1995. It is a way for the federal government to completely privatize universities and have them funded solely by deregulated tuition fees, the 90% of people who couldn't pay would take out large loans which would be payed back over a life-time. Milton Friedman thought of it.

Also Economist High Mackenzie, had this to say about Alex Usher's take on tuition reduction:

"[One] can only [come] to the conclusion that the poor are subsidizing the rich when postsecondary education is funded publicly by ignoring the tax system; implicitly assuming that the money to pay for postsecondary education is found on trees rather than raised from a real-world tax system. Taking the revenue sources into account turns the argument upside down. Why? Because we have a tax system that is roughly proportional to income; and income is much more unevenly distributed than postsecondary education participation.

A tax is regressive if the percentage of the payer’s income represented by the tax declines as the payer’s income increases. So again in direct opposition to the claim by critics of universally funded postsecondary education, it is the tuition fee that is regressive, because a flat amount of tuition fee makes up a lower proportion of a student’s income as her or his income increases. To repeat, it is the tuition fee, not universal funding, that is regressive.

To go further, as some have, and suggest that subsidized tuition is regressive reveals a total misunderstanding of the economic meaning of a “regressive” measure. A tax is regressive if the percentage of the payer’s income represented by the tax declines as the payer’s income increases. So again in direct opposition to the claim by critics of universally funded postsecondary education, it is the tuition fee that is regressive, because a flat amount of tuition fee makes up a lower proportion of a student’s income as her or his income increases. To repeat, it is the tuition fee, not universal funding, that is regressive.

We need to do a lot more to democratize participation in postsecondary education. We need to address much earlier in a student’s life the disadvantages related to income and socio-economic status that affect his or her ability to participate in postsecondary education. And part of doing more is recognizing the obvious—that steadily increasing tuition fee levels create barriers to access for lower- and middle-income students and have contributed materially to the increasing levels of debt with which students now graduate."
http://post-secondary.blogspot.com/2007/03/hugh-are-you-calling-regressive_21.html