Heather Roy's Diary Nov 5
act-new-zealand
Fri Nov 05 2010 13:00:00 GMT+1300 (New Zealand Daylight Time)
Heather Roy's Diary Nov 5
Friday, 5 November 2010, 4:49 pm
Press Release: ACT New Zealand
The Cost Of Tertiary Education
'Student Loans - the debt mountain' was the headline when the latest student debt figures were released at the beginning of the week. Almost 900,000 people have taken out a student loan since the scheme started in 1992, and over two thirds haven't fully repaid the money they borrowed.
According to a Ministry of Education report, a total of $13.9 billion has been borrowed and only $6.4 billion repaid. The New Zealand Government (read taxpayer) is currently owed $7.5 billion - 54 percent of the total amount lent.
Things are certainly very different for my children's generation now studying at University than they were for mine. However there is nothing wrong with student debt when it allows students who wouldn't otherwise be able to afford to study to do so, so long as their investment gives them the ability to repay the loan in the future.
The Student Loan Scheme has had several changes since its inception and its introduction also changed the way tertiary providers did business. Prior to 1990, polytechnics were input funded with little autonomy, and tertiary education at universities was UGC (University Grants Committee) funded, either free or coming with a very low price tag to students. There were full student allowances and grants available to most students.
In the 1990s, New Zealand introduced flat fees. This was accompanied with an income contingent student loan scheme which was a demand-driven, formula-based funding system, and which cut student allowances. Tertiary education as a result, became a more unified sector.
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Towards the end of 1999, an increased lenience was seen in the student loan scheme, and there was an increased eligibility for student allowances. Increased subsidies per-student were seen where tertiary education was concerned, and decreased per-student subsidies were noticeable for private institutions.
Since 2000, there have been a number of changes to the sector, including the establishment of the Tertiary Education Commission (TEC), the introduction of Performance Based Research Funding, more information on the labour market and an increased focus on industry training.
From 2001, all full-time students have been exempt from being charged interest while studying. And many will clearly remember the 2005 election bribe from Labour to exempt all borrowers resident in New Zealand from paying interest on their student loans. The perverse incentive this provides has seen all sorts of behaviours including some students taking a loan, investing the money and paying it back in full when they complete their studies and pocketing the income.
The loser in this interest-free situation is the taxpayer and it puts those who don't study but need a loan - to start a business for example - at a disadvantage.
New Zealand's student loan scheme is in line with those in many other OECD countries such as the US, UK, and Australia. The US Government has been lending to students since 1965 and has similar issues with repayment. US $605.5billion worth of Federal Student loans is outstanding today and other countries have similar trends .
Here, 71percent of New Zealand students take out student loans in order to study. In England the figure is 85percent of students, 77percent in Australia and 66percent in the US. The average student debt upon graduation for New Zealand students is $16,833, which can be compared to England's average of £24 702 (NZ$52 070).
The median payback period for New Zealand students is 6 years. The English experience has been found to vary greatly between genders; males take an average time of 11 years to pay back their loans and females take an average of 16 years.
Of New Zealand's 900,000 student loans most have been under $15,000, but 2000 of the loans have exceeded $100,000. 107,000, of these loans (12percent) have had to be written off due to bankruptcy, people leaving the labour workforce due to disabilities, or death.
People are frequently surprised when I tell them that the New Zealand government subsidises student fees for domestic students to the tune of 70percent, with students contributing the remaining 30percent to the cost of their tertiary education.
So what is the cost of tertiary education? The university fees for a medical degree at an Auckland University is $11,545 per year, fees for an undergraduate law degree is $4849 per year, $6005 per year for an undergraduate engineering degree. BA and BSc courses begin at around $4501 per year and Nursing, Physiotherapy and Architecture all cost about $5180 per year.
Earlier this year the government announced a tightening of the criteria for some state-funded tertiary education. Predictably there has been some consternation expressed, but affordability to both the nation and to individuals must be taken into account. We do our young people no favours by burdening them with a loan they will have little ability to repay.
Recent figures show that only half of those enrolled in a bachelor course (three-year degree) in 2004 had completed it within five years. Rationalisation under these circumstances is entirely reasonable. Tertiary education is a perfect example of a public good verses private good. Both the individual and society benefit from well educated citizens and it is appropriate that the investment is shared. The government though has a moral obligation to ensure the balance and incentives are right.
Lest We Forget - November 5 1605
Tonight Kiwis around the country will be burning through the 1116 tonnes of fireworks imported this year - double that of most recent years. The festivities surrounding the celebration draw crowds of all sorts, with a hype of excitement swallowing Wellington's Queen's Wharf, Christchurch's New Brighton Pier, Auckland's Waitakere Trust Stadium, and other regions of the country where the use of fireworks, public and private, will be enjoyed.
Guy Fawkes celebrations date back to the Gunpowder Plot of 1605, when Guy Fawkes, with the aid of a group of Catholic conspirators, had planned to blow up the House of Lords building in England for the formal opening of the 1605 session of Parliament. The plot was uncovered and the barrels of gunpowder defused before any damage was done.
On arrest, Fawkes did not deny his intentions, stating that it had been his purpose to destroy the King and Parliament. His intentions had been prompted by a 1563 legislation which demanded citizens recognise the King as Supreme Governor of the Church where refusal to submit was punishable by death.
The Gunpowder Plot was an attempt by Fawkes and his group of Catholic extremists to assassinate King James I of England, his family, and most of the Protestant aristocracy by blowing up the Houses of Parliament during the State Opening.
On January 31 1606, Fawkes and a number of others implicated in the conspiracy were executed in Old Palace Yard in Westminster. Guy Fawkes is in the 2002 List of "100 Great Britons" (sponsored by the BBC and voted for by the public), alongside such other greats as David Beckham and Winston Churchill.
ENDS
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