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Student financial support up for discussion

6 September 2003
Media Statement

Tertiary student financial support up for discussion

A discussion document describing New Zealand’s student support system has been released today.

Student Support in New Zealand aims to build a common base of understanding about the level financial assistance currently available to tertiary students. The document doesn’t set out specific changes, as these can only be advanced through the budget process. It sets out to engage students and other stakeholders to provide feedback on what refinements they think should be made to the current system.

Speaking at the New Zealand University Students’ Association’s conference today, Associate Education (Tertiary Education) Minister Steve Maharey said the discussion document sets out to clearly establish the facts on student loans and student allowances.

“Student support is a significant area of government spending and it’s always controversial.

“The government hopes this document can achieve what has not been possible so far in any forum: a common understanding of the operation of the system and of the constraints on the government so that we can work together in identifying the best way forward.

“The document reviews the performance of the tertiary education system and the student support system and looks at some approaches taken by countries overseas.

“While it clearly shows that New Zealand is in the international mainstream there are areas where we can make improvements.

“Just like investing in superannuation, our student support system involves setting aside money now as an investment in the future. Therefore it’s important in making future changes that we consciously strive to create an enduring system.

“That’s why we want to hear from students and others what their priorities for future changes are,” Steve Maharey said.

The government is accepting submissions from the public on New Zealand’s student support system until the end of October 2003. Student Support in New Zealand can be downloaded from the web at:

http://www.minedu.govt.nz/goto/tertiarystudentsupport

Student support discussion document - overview

The aim of the discussion document is to provide a common base of information as part of building broad consensus on the future direction for New Zealand’s student support system. We need to ensure that what we come up with is fiscally and publicly sustainable.

The key themes of the document are that:

- We are committed to maintaining open access to tertiary education. We believe this is crucial to helping us meet our goal as a knowledge society. Unlike many other countries, New Zealand’s tertiary education system is accessible to all. We are keen to maintain our open access to tertiary education. We are also committed to enhancing the quality and relevance of our system and have implemented reforms to ensure that this happens.

- The government is committed to improving aspects of our student support system. As more students enter tertiary education, the level of total student loan debt is rising. The government is aware of public concerns about increasing levels of student debt and has taken a number of steps to make tertiary education more affordable for students including writing off interest for those studying full-time or part-time on low incomes, implementing new repayment provisions.

- The costs of tertiary education are substantial and that there are constraints on the government funding. The high costs of maintaining open access system are often not fully appreciated. For instance from July 2002 to June 2003 the government spent:
- $1,754 million for tuition subsidies to fund student places at tertiary education providers
- $109 million for student loans (this excludes capital expenditure)
- $387 million for student allowances
- an estimated $190 million on industry training, Modern Apprenticeships, Gateway and Skill enhancement programmes.

- The government’s reforms are intended to build on the good features of the current system and are based on a number of sound principles. The principles underpinning any changes to student support are:
- to ensure that New Zealand’s tertiary education system makes the best contribution to national development;
- to ensure equity and fairness.
- to ensure that government investment in student support and tertiary education is financially sustainable.
- to ensure that tertiary education is affordable for students.
- to ensure consistency with the wider social-assistance system.

- The high cost of providing tertiary education has meant that they must be shared between the government, students and their families. The government pays a tuition subsidy as well as the tuition fees students pay. The student support system (student loans and student allowances) supports the participation of all New Zealanders by reducing the financial barriers to study.


- Our student support system compares favourably with other systems internationally. Tuition fees in New Zealand are broadly in line with those charged in other countries. Our Student Allowances Scheme ensures those students in greatest need receive support. Our income contingent Student Loan Scheme means that borrowers don’t have to repay any money until they earn sufficient income. This type of scheme offers more protection for borrowers than mortgage style schemes, from the risk that they will be unable to repay their loan.

While an income-contingent repayment schedule generally results in longer repayment times than mortgage schemes, the average repayment period in New Zealand (9.5 years) is similar to those in other international income-contingent student loan schemes and is tracking down as new policies cut in.

We also have very generous interest write-off concessions are designed so that they give most benefit to those with low earnings. The effect of these interest write-offs is that $198 million was written off in 2002/03. This is just over half of all interest on student loans for that year. Around three-quarters of borrowers in 2002/03 had some interest written off.

- Our current system has many good features that are worth building on, however, some aspects need improving. The government has already made a commitment to increase access to student allowances. This will help reduce reliance on student loans for more students. We also need to think about changes to the Student Loan Scheme.

- Realistically we will not be able to do everything we would like to all at once. Some of the suggestions the government has heard – such as universal allowances and zero fees are simply not affordable. Potential changes to the student support system will need to be prioritised. Changes will need to be incremental, made over progressive budgets.

The government is seeking public feedback on what are the priority areas are for change to New Zealand’s student support system.

ENDS

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