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March 21, 2016

Tax changes deal another blow to law students. Now what?

525742850_d93f3b87fd_oby Marcus McCann

A major tool law grads have been using to moderate the effects of high tuition is about to disappear. The effect is potentially very large, meaning effective tuition will go up by tens of thousands of dollars for some students starting in 2017.

In its February 25, 2016 budget, the Ontario Liberals under Kathleen Wynne announced an end to the tuition tax credit, with the savings funding upfront bursaries equal to average undergraduate tuition for students from low and modest incomes.

I don’t quibble with the policy. After all, the current system disproportionately benefits the families of students who least need it. That’s why major student groups in the province have been clamouring for years to redirect those tax credits to upfront payor relief.

For law grads from the debt cohort — those who entered law school after tuition deregulation in the late 1990s — the tuition tax credit helped soften the effects of their debt loads in the early years of their practice. Needless to say, this was especially welcome for new lawyers practicing in poverty law, criminal defence, or whose practices were outside of the province’s big cities.

The credits can be rolled over from year to year. So, as tuition shot up past $20,000 and now $30,000 a year at some schools, students racked up larger and larger tax credits. That meant that students graduating from the University of Toronto Faculty of Law, where the tuition problem is most acute, often graduated with very sizable credits. Many lawyers then used their early good tax returns to pay down the principle on their debt.

No one thinks that the system was efficient or equitable. Firstly it requires people to carry and service six figure debts until they have enough income to offset through the tax code.

Discouragingly, the system bore an inverse relationship to need. Students from wealthy families can graduate with no debt and hefty rollovers of tax credits for future years. Whereas students from low and modest incomes had their credits reduced by the dollar value of any needs-based scholarships they received, meaning their rollovers were smaller, even though they were likely carrying more debt.

The Wynne government has cancelled an inequitable program and replaced it with something that — if it lives up to expectations — is vastly better. However for law students from low and modest income families, the changes amount to a major new burden.

I think Wynne has ultimately done the right thing. Frankly, graduates from professional programs aren’t exactly the most sympathetic constituency. And since the details of the new program don’t appear to have been finalized, there may be room for tweaks in the months ahead.

But the onus really falls on Ontario law faculties. These tax credits have been an important part of the overall debt picture for students during and after deregulation. As a practical matter, graduating classes after 2017 are going to have to swallow tens of thousands of dollars of additional repayments.

Ever-climbing tuition met by a shrinking toolbox for students facing high debt is a toxic combination. Something’s gotta give. We have to take a long hard look at the policies of law faculties over the last decade, with an eye to affordability for those least able and least likely to attend. Absent significant intervention by the province, law faculties must be willing to grapple with tough questions as the old tax regime is phased out. I hope they have the courage to do so.

Millard & Company specializes in employment and human rights law and has represented parties in many cases both inside and outside of the courtroom.

Photo by @schwglr (Flickr) used under cc licence


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