How the new government will transform tertiary education

Note: This article was published originally in the now-discontinued NZME journal Education Central on 25 October 2017

On 19 October, Winston delivered his verdict: Labour is to lead the next government, in coalition with NZ First.  And on 24 October, the two party leaders signed the formal coalition agreement listing priorities “which Labour will support alongside its policy programme”.

In many areas, including tertiary education, the NZF election policies were closely aligned with Labour’s. Both parties want to increase financial support for tertiary students.  Both want to reduce immigration –  partly through reducing international student numbers in low-level tertiary qualifications that have been used as a pathway to residency. Both want to strengthen careers advice. Both propose a national dialogue on the future of education.

National’s policy, on the other hand, was almost an afterthought, released in the days leading up to the election. Their policy statement mainly focused on their achievements in government but also promised to raise the target for the value of international education to $7 billion by 2025 – up from the present target of $5 billion – and declared an intention to work towards having a university ranked in the global top 50 (without specifying a date to achieve this target). 

With nine years to think about their priorities, Labour had developed a detailed plan that covered every aspect of the system.  And with agreement between the coalition partners on the direction of tertiary education policy, NZF was evidently happy to support Labour’s wide-ranging plan.   Now the top priority for the new minister will be to set priorities from that extensive menu. 

I focus on just a few of the most important initiatives that featured in the election campaign.

Three years’ fees-free post-school education

Labour’s flagship policy of three years of fees-free tertiary education retreads and spruces up the Studyright policy introduced in 1991 by the then National government and removed towards the end of that decade[1].  The new policy will start its six-year phase-in in 2018. In the first year, as the policy is rushed into effect, and as officials work on the complex system changes required to implement the policy, the government will look to find a mechanism to pay the fees – possibly by writing off fees borrowing by the eligible students. But, as the policy phases in and fees reduce to zero for the first three years of students’ enrolments, the government will want to strike new funding rates that compensate institutions for those foregone fees.

Given the large variations in tuition fees between institutions, the new fees-free funding rates would see some institutions lose, while others would receive a windfall. Negotiations with the sector – especially with the powerful university lobby – on how to manage this will be interesting.

The Labour party expects that its fees-free policy will boost participation by around 15%. Conventional wisdom suggests that such a large-scale increase is unlikely, certainly in the short term. International evidence suggests fees don’t provide a barrier to study as long as there is adequate student financial support.  In New Zealand, everyone who can meet the academic entry requirements for a degree and who wants to study at that level can find a place in the system – if not necessarily in their programme of choice.

If participation rises, it may be less a consequence of this policy than the student support increases (see below).  And, possibly, a result of a change in institutional education performance measures to de-emphasise qualification completion – a policy given the catchy brand ‘hop-on hop-off’ tertiary education. But with a falling school-leaver cohort and a strong employment market, the overall increase in enrolments is likely to be small in the short- to medium-term

Free tertiary education will be a popular move.  But if the participation response is as slow as I expect, critics will mark the government down because this measure represents dead-weight spending – a high cost for a minimal change.  And many will complain that fees-free tertiary education (especially at the degree level) is regressive – because the benefits are disproportionately captured by people who will be among the best paid in the society. 

More student financial support …

Labour also pledged an extra $50 a week in the living costs component of the student loan scheme, and for those who receive a grant under the targeted student allowances scheme. These moves will take effect from 2018.

That’s also a high cost: under the interest-free student loan scheme, lending costs around 40 cents per dollar. And this policy – increasing the amount of borrowing – will increase repayment times and hence, will increase the cost of lending[2].   But this policy is a response to increases in rents, which have risen much faster over the last ten years than have the borrowing entitlement and the allowance rate, (which move in line with the consumer price index).

While the $50 a week increase is the headline policy in student financial support, both parties have lots other targets in their sights.

  • Labour promised to restore the eligibility of postgraduate students to student allowances, removed by the former government in 2012.  While that move will win the government support from many, this could also be held to be a deadweight cost, given that there was no discernible drop in postgraduate enrolments when allowances eligibility was removed.
  • The NZF and Labour manifestos both mentioned exploring how to use the loan scheme to create incentives for people to work in areas of skill shortage.
  • And both referred to investigating a first in family scholarship scheme, to provide financial support to those who come from families where there is no tradition of participating in tertiary education.

But fewer international students …

International student visa rules will also change. For sub-degree students, work rights will go. Requirements for post-study work visas will ramp up, stemming the pathway to residence for those without degrees.

A shift to a focus on higher levels and higher quality is a good long-term strategy.  But it comes with a high short-term cost; Labour estimates that these changes will reduce provider revenue by $250 million a year. According to the party’s policy statement, these losses will be mitigated by the “plan to introduce three years free post-school education [which] will see domestic enrolments grow 15%”.  But, as noted above, that level of increase in domestic enrolments is not likely in the short term.  If I am right, universities will be unaffected by the planned international education changes but many other tertiary providers will suffer financially from a fall in their international student numbers.

What else?

Of course, there’s much in the new government’s sights.

We can expect the new minister to explore incentives on employers to take on apprentices. 

And a number of the moves made by the former government will likely be reversed – for instance:

  • restoring a requirement for governing councils of institutions to have a student member
  • relaxing the requirement for adult and community education to focus on literacy and numeracy and disadvantaged groups
  • easing the lifetime 7 EFTS limit on borrowing through the student loan scheme

It will be an exciting three years. 

[1] That policy aimed to guarantee three years tertiary education for young people and ex-beneficiaries.  It was implemented through a funding differential between those entitled to the Studyright and others.  But in an environment of deregulated fees, many institutions didn’t pass on the price difference to students.  Labour’s new policy doesn’t have that weakness – it’s fees free for the target group.  Labour’s target group is also slightly different – the age criterion is replaced by targeting on the basis of tertiary education consumed in the past.

[2] Note, however, that the rise in lending will be partially offset by a fall in borrowing by the beneficiaries of free fees.

%d bloggers like this: