Hon Steven Joyce

Minister for Tertiary Education, Skills and Employment

24 May 2012

Tertiary savings fund new investment

Budget 2012 rebalances the Government’s $4.3 billion investment in tertiary education between expenditure on student support and investment in tuition and research, says Tertiary Education, Skills and Employment Minister Steven Joyce.
“We have one of the most generous student support systems in the world. Rebalancing it allows us to free up money we can reinvest in improving the quality of tertiary education we provide, and help our overall fiscal position,” Mr Joyce says.

Key changes include:

• Increasing the student loan repayment rate for all New Zealand-based borrowers over the repayment threshold from 10 cents to 12 cents in the dollar, saving $184.2 million operating over four years.
• Broadening the definition of ‘income’ for student loan repayment purposes, saving $3.1 million operating over four years.
• Removing the voluntary repayment bonus, saving $43.5 million operating over four years.
• Implementing information-matching between Inland Revenue and the New Zealand Customs Service to identify borrowers in serious default.
• Limiting the number of courses students can borrow for in one year to two effective fulltime equivalents (EFTS).
• Keeping the parental income threshold at current rates until 31 March 2016, saving $12.7 million operating over four years.
• Removing eligibility for student allowances for postgraduate study, saving $33 million operating over four years.

The student support changes in Budget 2012 will provide operating savings of $240.3 million in 2011/12. A further $65 to $74 million a year of operating savings over the next four years will be largely re-invested across the wider tertiary system.

“The Government is committed to interest-free student loans, but we are determined to reduce the write-off on taxpayers’ investment.
“Since coming into government, we’ve reduced the write-off from 47 cents in each dollar of student loans down to 45 cents. Changes we are announcing today will reduce it further to 41 cents – close to our target of 40 cents,” Mr Joyce says.

“From 1 April 2013, graduates and ex-students will have to pay off their student loans faster so the Government can invest more in the next generation of students. This involves increasing the repayment rate from 10 cents to 12 cents for each dollar of income above $19,084 a year.

“We will cancel the voluntary repayment bonus, because it is not creating the increase in repayments we were hoping for, and we now have other priorities for expenditure. That will save around $43.5 million over the next four years.

“We will introduce measures to start tackling the blow-out in the cost of student allowances. Costs have increased from $385 million in 2007/08 to $624 million in 2010/11, due in part to policy settings of the previous government.

“We are going to focus student allowances on the initial years of study – and to assist low-income families who need it most.

“We will freeze the parental income threshold at its current rate until 31 March 2016, and ensure the limit of 200 weeks’ access to student allowances is consistently applied.

“Postgraduate students will no longer be eligible for student allowances. This refocuses allowances on students working towards a first qualification, and acknowledges that students studying at postgraduate level gain a higher private return from their study. Those students will continue to have access to interest-free loans.

“Alongside these changes, we have recently consulted on our commitment to limit the annual amount a student can borrow on their loan to that equivalent to the workload of two fulltime students, stopping people over-using government support.”

Other key Budget savings over the next four years (unless stated otherwise) include:

• Removing short-term funding to support the embedding of literacy and numeracy into level 1 to 3 programmes, which is now largely completed. This will mean a saving of $22.4 million.
• $5.4 million from the Government ceasing funding for Adult and Community Education in universities. The Government will instead fund some of these programmes directly through community providers.
• $8.9 million over one year due to reduced demand in industry training courses following the operational policy changes This will be reinvested in the university sector.

“Changes in Budget 2012 release $240.3 million in 2011/12 and $276.3 million over the next four years in student support funding for the Government to reprioritise, while reinvesting in strengthening overall tertiary education provision for students in priority areas like engineering, science, and research.”

ENDS

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