Why the Canadian government is raising the graduate repayment threshold

Back in October, Canada re-elected the governing Liberal Party for a third consecutive term in office, but as in 2019, the party failed to achieve a majority.

However, because Canadian political convention prefers to allow minority governments to rule as if they had a majority for two years to requiring parties to negotiate and compromise with one another in order to achieve working majorities, the agenda proposed by the Liberal Party in its election manifesto is now being implemented more or less as it was presented on the hustings.

This was made clear in mid-December when the Prime Minister published what are known over here as “mandate letters” – a set of marching orders to each cabinet minister setting out what each would be expected to achieve over their coming term of office.

Before getting to the details of these letters, it bears recalling that Canada is a federation, wherein nearly all of the nuts and bolts about institutional funding and tuition fees are decided at the provincial level.

The Government of Canada’s interests in higher education come mainly in three areas. First, in student financial assistance, an area of overlapping federal and provincial jurisdiction. Second, with respect to Indigenous Peoples, for whom the crown has treaty obligations with respect to supporting education. And third, for science/technology/innovation, where it plays a role in handing out funds for research and research infrastructure to individuals and institutions.

So for the purposes of higher education there were three separate letters which touch most closely on the topics this blog cares about – the ones to Carla Qualtrough (Minister of Employment, Workforce Development and Disability Inclusion, a department which also runs the Canada Student Financial Assistance Program, or CSFAP). François-Phillippe Champagne (Minister of Innovation, Science and Industry) and Marc Miller (Minister of Indigenous Services).

Raising the graduate repayment threshold

With respect to student aid, we see is a re-stating of manifesto commitments, including:

• A rise the student loan repayment threshold to $50,000 (roughly GBP30,000) – this one is going to cost an absolute fortune in the long run, but since the Parliamentary standard is to only cost things for five years ago, the full impact of this change won’t actually be calculated until the Office of the Chief Actuary gets around to costing it in its regular review of the CSFAP in about two years’ time. As it stands right now, though, the median graduate of a two-year college won’t be paying anything at all for three or four years after graduation and many graduates will simply never pay back their loans.
• A change to repayment rules giving parents a complete holiday on student loan repayment while they have children under the age of five
• Removing all interest from student loans (a cheap and relatively harmless measure loan rates stay at historic lows, but if they ever rise again, this will be a very expensive subsidy which confers zero almost benefit with respect to access).
• Increasing student debt relief for doctors and nurses who work in rural/remote areas. This is a perennial policy favourite for governments who wish to appear to be doing something about rural health care without actually doing so.

The big question left open by the mandate letter is what will happen to income-based student grants. Until 2019, the maximum available was $3,000 per year. In its 2019 election manifesto, the Liberals promised to raise the limit to $4,200 but never got around to enshrining this in either legislation or regulation. As an emergency measure during COVID, the government chose instead to temporarily double the grant maximum to $6,000 for 2020-21, and then later extended this out to mid-2023.

However, there remains no commitment as to what should happen after that date. Will the grant revert to being $3000? Will it be pared back to the 2019 promised-level of $4200? Or will the government choose to keep it permanently at $6000? This promises to be a focus on some intense lobbying over the coming Parliament.

No news on Indigenous Peoples

On the Indigenous Services front, there were no promises made in the manifesto, but there was some hope that the mandate letter might contain some guidance around a commitment made in the 2019 with respect to the development of a funding model for indigenous post-secondary institutions.

Work to that effect has been going for two and a half years, and delivering on this promise is something that logically should get done in this Parliament but there is nothing about it in the mandate letter. This absence does not mean the government isn’t going to work on this problem – it does mean that it doesn’t consider this promise to be one of its top dozen or so priorities within this portfolio, which is unfortunate.

CARPA Diem

Innovation and Science was an area where the Liberals made a lot of promises in the last election. This was not because they have coherent ideas on the subject – rather, in order to maintain their position as the party whose economic vision is the most pro-science and least resource extraction-driven, they need to make a lot of promises in this area so they can look like the swots they fondly imagine themselves to be.

Nearly everything in the letter was taken verbatim from the manifesto – 1,000 more Canada Research Chairs, funds for university/college commercialization efforts, the creation of a new fund for “moonshot” research on vaccines (yes, we all cringe at the word, too).

Included in the manifesto as well was a proposal to create a Canadian Advanced Research Projects Agency (cue as many CARPA diem jokes as you wish), based on the American DARPA model. The genesis of this proposal is however somewhat different from the parallel one which is awaiting Royal Assent in the UK.

Over here, the Dominic Cummings-inspired rationale about the power of giving lots of money to a small group of boffins with great latitude and little oversight would not play well. It’s less about unshackled geniuses than it is “well, this is something big we’ve never tried before and it seems to work in the United States so let’s give it a whirl”. Yes, this is actually the level of analysis that goes into science policy-making over here, and on that basis the Liberals committed $2 billion (GBP 1.2 billion) to the idea in the manifesto.

Or so we thought. Minister Champagne’s mandate letter seems to indicate that the Government is either changing its mind about CARPA or it really doesn’t understand what DARPA is actually about. The Innovation Minister’s mandate letter specifies that he is to:

develop a new approach to support high-risk/high-reward transformative research and development to unleash bold new research ideas, drive technological breakthroughs, protect Canada’s competitive advantage and help Canadian companies grow and create highly skilled jobs. In moving forward with a uniquely Canadian approach modeled on the Defense Advanced Research Projects Agency (DARPA), work with the Minister of Health to develop a plan to modernize the federal research funding ecosystem to maximize the impact of investments in both research excellence and downstream innovation, with a particular focus on the relationships among the federal research granting agencies and the Canada Foundation for Innovation”.

If you find this confusing, fear not: no one over here can make hide nor hair of it, either. The entire point of a DARPA, such as it is, is to stimulate private sector innovation and at all costs avoid the bureaucracy and groupthink that dominate organisations like granting councils.

Yet now, the proposed CARPA is somehow part of a revamp of the funding council system – that is, precisely the kind of science bureaucracy that ARPAs are meant to avoid like the plague. The jury is out over whether this paragraph was simply written by someone who is clueless about S&T policy, or if the CARPA idea is being deliberately sabotaged by being saddled with a set of ludicrous and irreconcilable conditions.