54. University Tuition: Is it Really More Expensive?

54. University Tuition: Is it Really More Expensive?

Is University Tuition in Ontario really more expensive than it used to be? Join us as we explore this important topic.

Simple Money Podcast – Canada’s Own Personal Finance Podcast
Email: info@ffcoach.ca Twitter: F_FCOACH

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Episode Script

Hello and welcome back to Simple Money Podcast, Canada’s own personal finance podcast that about the burning issues that are important to you and your family. I’m your host, Matthew Siwiec, also known as the friendly financial coach.

So how many times have we heard or even said that *clears throat*, and I quote “When I was your age, I worked during the summer to pay for my tuition”

And of course, this is often followed by a teenager rolling their eyes. So out of curiosity, I actually did the math to see what the numbers tell us. I compared the number of hours that a student would need to work at minimum wage to pay for the average undergraduate program in Ontario.

These results were then compared to historic numbers.

All earnings were also adjusted for CPP and EI deductions. Tuition in all cases was below the basic personal amount and therefore, no income taxes would have been due or if they were charged, would be returned when they filed their income taxes.

Along the way I also found some surprising details of how tuition was treated. At one point I was even digging in newspapers from the late 1980s.

One of the big ones is that tuition was fully tax deductible – meaning that your tuition costs would directly cut your taxable income dollar for dollar. This was the case even if your parents paid for your tuition!

This direct deduction meant that students wouldn’t have to pay CPP, and EI – known as UI back then. This big benefit that was eliminated in 1988 and converted to a tax credit like it is today.

A Historical Look at Tuition

Ok, enough technical speak! On with the show So our first stop is 1980! The top selling movie is the Empire Strikes Back and people are rocking out to popular songs by Blondie and Queen. The top album for the year was the monumental album The Wall by Pink Floyd.

Minimum wage was $3 and hour and tuition was $832 a year for an average undergraduate program. With tuition being full deductible, this meant that it would take just over 277 hours of work to pay for the annual costs of the tuition. By working a full-time 35 hours a week job, this equates to 7.91 weeks or around 2 months. Jumping to 1990, the world is changing – with the grunge scene beginning to blow up and neon is everyone’s favourite colour. MC Hammer and Vanilla Ice also take the world by storm.

At this point, tuition costs $1,680 and minimum wage is $5.40 an hour. Students now need to work just over 318 hours to pay for a year of undergrad or just over 9 weeks of full-time work. Flashforward to 2000, and we now see that it takes a whooping 641 hours to pay for an undergraduate program. At this point minimum wage is $6.85 and average tuition is $4,256.

It’s also important to note that the cost of tuition is now over the CPP basic exemption amount, meaning that students that are working have a slight reduction in pay to cover this CPP.

Tuition, Now

So, it’s now present day – or at least the 2018/19 school year – tuition is now a massive $8,838 and minimum wage is $14 an hour. This now means that students need to work over 663 hours to pay for one year of their program – equating to just under 19 weeks of school. This of course, just covers tuition and not books, accommodations, and other living expenses.   Overall, what we see is that current students need to work more than twice the amount of hours at minimum wage to pay for their program than their peers in 1980 and even 1990.

University Tuition personal finance toronto accounts budget financial literacy budget Friendly Financial Coach Bank Account Help Toronto Retirement education Matthew Siwiec

The root cause of this is that tuition inflation has been increasing at a much faster pace than minimum wage. 6.41% versus 4.14%. This may seem like a small gap, but this growth compounds on itself. That’s it for today, thank you so much for joining into our podcast today. If you’re enjoying the show, you can support us by rating or sharing the show with anyone that you may think that it will benefit. You can also contact me at info@ffcoach.ca or find me on Twitter at F_FCOACH Take care and talk to you soon!

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