**03/25/2015 Update: **Corrected calculations appear at the end.

Today we look at how much it costs to go to university in Ontario. This topic is frequently in the news and student organizations are always trying to bring attention to the topic. Typically we hear about how much it has gone up since some period in the past or how it ranks compared to other provinces. Today we try to answer a seemingly straightforward question. How much is tuition in Ontario? We are not talking about housing, food, books or booze budgets; we are simply looking at fees paid to the school. This is a numbers post. There will be no exploration of the value of school or fairness of tuition levels.

I will use one of my old stomping grounds as a starting point, the University of Western Ontario. Undergraduate tuition + fees for a science degree totals $7,296.93 a year for a Canadian citizen.

Of this, $5,975 is actually tuition. The rest is for student organizations, building endowment, etc.

Over four years this means the total amount paid is: $29,188. $23,900 is actually tuition.

Undergraduates in Ontario get a yearly refund from the government equal to 30% of their tuition. This does not include the fees. This refund is therefore $1,792 a year or $7,170 over 4 years.

With this 30% grant the total paid, including fees, over 4 years is $22,018 or $5,504 a year.

Now we can deal with the tax credits which are where there are some options. When you are going to school you can deduct $65 a month for books and $400 a month for living expenses for a maximum of 8 months a year. That is $3,720 a year or $14,880 over 4 years. You can also deduct your tuition, excluding fees.

This means that a university graduate can store up $38,780 in tax deductions over their four years.

Assume the student decides to pay their student loan off over 7 years at 5%. The interest on the loan is also tax deductible. We’ll only take first 5 years of interest deductions in to account here so the real world benefit would actually be a bit higher.

You pay a total of $4,026 in interest on the initial loan. So our total deduction over the 5 years following graduation is (education deductions + interest deductions):

$42,806.

You can use all of these credits while you are in school or you can carry them over until you graduate. The smart student holds them all until they graduate and they are making more money and therefore have a higher marginal tax rate. The benefits to holding these credits depend on how much you make in the 5 years after you graduate. The average university graduate starting wage in Canada is around $50k. Assume the graduate uses equal parts of their deductions each year. They could probably benefit more if they waited until the later years when they were making the most but we will keep it easy. Let’s look a few different scenarios.

Now if you were to save up before hand and pay the tuition as it came up you would no longer have the student loan. This means no interest to pay or deduct.

We have done some quick calculations that show what a person ends up paying to a school for their education. So now if you want to have a conversation about the fairness of tuition levels you have some numbers to work it.

**Update/Correction:**

As pointed out in the comments the minimum tax rate is used to calculate refunds rather than the marginal rate. The provincial book and educations amounts are also slightly different at $156 and $520.

This gives us $43,650 total provincial deductions at 5.05% refund and $36,898 total federal deductions at 15% for a total of $7,739 in refunds if you take no loans.

Interest is $4,123 for $22,018 at 5% for 7 years. So with loans we have $47,676 total provincial deductions at 5.05% refund and $40,924 total federal deductions at 15% for a total of $8,566 in refunds.

So total per year is:

**$3569 without loans**

**$4394 with loans**

Really interesting. I actually would never have thought to consider factoring in the post-graduation tax credits.

Very interesting. But marginal tax rates don’t matter here. Tax credits (including tuition, education, and textbook amounts) use the lowest tax rates, unlike RRSP deductions which use your marginal tax rate by lowering your taxable income. Combined, tax credits result in a 20.5% tax reduction (15% federal + 5.05% Ontario). The textbook and education amounts are also slightly different for provincial taxes.

You also can’t defer tuition credits to a later year. Tuition credits are basically structured so that you have to use them to reduce your tax owing to zero in that year, and can only carry forward any remainder.

I don’t think the above changes your final numbers much. You’re still getting back roughly $8,000 in reduced taxes. It’s just not salary-dependent.

Yeah I totally missed the minimum tax rate and carry over rules. Thanks for pointing it out. I did some quick (hopefully correct) re-calculations at the end of the post.