Cost Estimate of Bill C-246: Tuition for Persons with Disabilities

This private member’s bill would amend the Income Tax Act and the Canada Student Financial Assistance Act so that students enrolled in a designated educational institution with a Disability Tax Credit (DTC) certificate will receive a grant equal to their annual tuition fees. It is assumed that the bill will come into effect on August 2021, the start of the 2021-22 loan year[^1].

The cost of the proposed bill was determined by multiplying the estimated number of students with a Disability Tax Credit (DTC) certificate by their average tuition fees in 2018-19. The total cost was adjusted based on potential savings resulting from the effective decrease in Canada Student Loans issued, and the consequential decrease in the amount of the Tuition Tax Credit claimed by individuals receiving the new grant.

Number of students with a DTC certificate

The number of students with a DTC certificate was estimated based on the prevalence of DTC certificate holders in the general population, adjusted for an assumed lower take-up of the program[^4]. The two distributions are assumed to be equal.

To estimate the prevalence of DTC certificates in the general population, in each respective age group, the number of DTC certificate holders in 2018 was divided by Statistics Canada’s 2018 population estimates. Using Statistics Canada’s 2018/2019 Postsecondary Student Information System (PSIS), these proportions were then applied to the number of domestic students that were enrolled in postsecondary institutions in that year, by age.

Statistics Canada’s PSIS doesn’t provide the distribution of students 40 years and over, whose prevalence of a DTC certificate increases with age. To estimate this population, their 2018 distribution in Statistics Canada’s Social Policy Simulation Database and Model (SPSD/M, version 28.0) was used in conjunction with their distribution in University of British Columbia’s graduate level enrolments.

Given that the prevalence of DTC certificates in the general population is applied to the student population the estimate is assumed to implicitly account for a behavioural response that could arise due to an increase in the demand for post-secondary education for students for whom tuition fees are a cost barrier[^5].

Going forward, the number of students with a DTC certificate was projected based on the Office of the Chief Actuary (OCA) most recent enrolment projection (adjusted for PBO’s September EFO labour force and demographic projections) and the historical growth rate of DTC certificate holders.

Average tuition fees

The average tuition fees of full-time students and part-time students receiving the Canada Student Grant for Students with Permanent Disabilities (CSG-PD) from 2014-15 to 2018-19 was assumed to be representative of the student population with a DTC certificate (administrative data received from ESDC)[^6]. The weighted-average tuition fees of full-time and part-time students receiving the CSG-PD in 2018-19 was used and projected forward using the historical relationship between the tuition fees of those receiving the CSG-PD and OCA’s tuition fees projection.

Cost savings- Canada Student Loans Program

PBO’s Student Financial Assistance Model was used to calculate and project net expense for Canada Student Loans Program (CSLP) under the current policy as well as the impact of this measure. Historical loan values attributed to students in each period of a loan lifecycle determined the change in the value of outstanding federal student loans. For more information on PBO’s model, see PBO report “Projecting the Revenues and Expenses of Canada Student Loans Program”.

The proportion of borrowers receiving the CSG-PD and the amount of Canada Student Loans (CSL) disbursed to them in the 2018-19 loan year were used to estimate the potential decrease in CSL disbursements. Under the CSLP, an increase in the amount of grants that students receive decreases the amount of CSL issued.

Cost savings- Tuition Tax Credits

Students receiving free tuition under the proposed bill will no longer be able to claim the Tuition Tax Credit but could still have an unused stock of credits that they could claim in later years.

As a baseline, the stock of unused credits was projected prior to the proposed policy. This was estimated using the stock of unused credits in 2013, the number of persons claiming the DTC and the Tuition Tax Credits and their amounts from IR0569 (2012-2017), Finance Canada’s Tax Expenditure Reports (1995-2021), grown with PBO’s projection of enrolment and tuition fees for students with a DTC certificate.

To project anticipated savings, the stock was gradually depleted based on Finance Canada’s expenditure estimates of previously eliminated education credits (Education Tax Credit and the Textbook Tax Credit; eliminated on January 1, 2017).

In 2021-22, PBO estimates that 30,942 students with a DTC certificate would apply for the grant, representing 1.7% of the total domestic student population. Based on PBO’s projection, by 2025-26, the number of students applying would grow to 38,980, representing 2.1% of the total domestic student population.

Number of students with a DTC certificate

The prevalence of Disability Tax Credit (DTC) certificates amongst the student population could differ than that of the general population, as individuals with severe disabilities are less likely to attend post-secondary education[^7].  Additionally, the assumed take-up rate of the grant could differ than the one estimated. This is the source of greatest uncertainty in the cost estimate.

On the other hand, since the DTC is a non-refundable credit, students who may be eligible for the credit may not be claiming the credit due to low tax payable and accessibility barriers[^8]. Thus, offering free tuition to students with a DTC certificate could incentivize more students to apply for the certificate, increasing the projected cost estimate. However, due to lack of research on the subject and the DTC’s accessibility barriers this potential behavioural response could not be estimated.

Additionally, projected growth in student enrolment could differ as the decision to enrol in post-secondary education is influenced by the labour market and the broader economy. Additionally, the projection method assumed that the historical growth (2017-2018) of DTC certificate holders would continue until the end of the projection period. Any deviation from these growth rates due to behavioural responses – for example, lower growth due to the COVID-19 pandemic, or higher growth due to the incentivizing effect of the measure— would be a source of error in the cost estimate.

Average tuition fees

The average tuition paid by students with a DTC certificate could differ than that of students needing student financial assistance through the Canada Student Loans Program (CSLP), including the CSG-PD. However, given that individuals living with a disability are more likely to have financial need the estimate is assumed to have moderate uncertainty. Additionally, the grant could incentivize individuals with a DTC certificate to pursue full-time studies rather than part-time studies. Given that, students could increase their academic course load, increasing the amount of tuition fees paid, and the projected yearly growth rate of the cost estimate.

Cost savings- Canada Student Loans Program

The universe of CSLP administration data was available to determine historical costs, however, the proposed changes required assumptions using other external data sources. The value of student support provided is sensitive to the assumed economic outlook as the decision to enrol in post-secondary education is influenced by the labour market and the broader economy. Uncertainty is inherent in the forecasted number of people who decide to enrol in post-secondary education and require support through CSLP. The distribution of students in post-secondary education and CSLP would be different from what was estimated. Additionally, since average tuition for borrowers with a CSG-PD is greater than the average Canada Student Loan disbursement for borrowers with a CSG-PD it was assumed that the grant will replace all CSL disbursed. However, depending on individuals’ circumstance, some students with a CSG-PD may still receive a CSL.

Cost savings- Tuition Tax Credits

The total value of unused credits for students with a DTC certificate could differ than the one estimated.

• Estimates are presented on an accrual basis as would appear in the budget and public accounts.
• A positive number implies a deterioration in the budgetary balance (lower revenues or higher spending). A negative number implies an improvement in the budgetary balance (higher revenues or lower spending).
• “-“ = PBO does not expect a financial cost.