Tertiary education

Student places

How many more tertiary student places will there be?

The refocused funding will be used to allow universities and ITPs to meet increased demand for tertiary education. This means funding 1,735 additional full time places at universities and 3,173 extra full time places at ITPs compared to what was previously budgeted. As a result, the number of places in universities will be 765 greater than this year’s record number and the number of core places at ITPs will be 455 greater than this year. The funding for places will be prioritised towards areas of high demand.

How will you decide where/what the areas of high demand are?

The TEC will work with universities and ITPs to determine the areas of high demand. In doing so, the TEC will seek to allocate according to the priorities of the Tertiary Education Strategy.

How does this help universities who are already managing their enrolments for 2010 by turning students away?

All universities have informed the TEC that they will continue to manage their enrolments according to their current funding levels throughout 2010. The Government has confirmed that there is no extra funding available in 2010 and Tertiary Education Organisations (TEOs) are all committed to managing within their means.

The extra funding for places in 2011 will create approximately 4,900 EFTS above previous baselines – a record number of core tertiary places. This will enable universities and ITPs to meet increased demand.

What is happening to medical places?

There will be funding for an additional 20 places to the first year undergraduate medical cap, increasing the number of places available to 445 from 1 January 2011. This is in addition to this year’s increase of 60 places. The new places will be split between the University of Auckland and the University of Otago. Preferential entry will be given to students from rural backgrounds as a means of addressing critical shortages of doctors in rural areas (under the Rural Origin Medical Preferential Entry Programme).

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Tuition subsidies

What is the Student Achievement Component or SAC?

The SAC is the government’s contribution to the direct costs of teaching, learning and other costs driven by student numbers within approved tertiary education Investment Plans.

Are there any changes to the Student Achievement Component funding rate?

Around $40 million per year will be invested to increase the SAC price by 2.2%. The increase will support quality tertiary education.

What is happening to OTEP funding?

It is important that an even-handed approach is applied to funding TEOs. To ensure there is a level playing field, the funding Other Tertiary Education Providers (OTEPs) receive is to be brought in line, over time, with funding rates for PTEs.

For some OTEPs, the reduction will begin in 2011. In all cases, the transition process to the lower rate will be worked out on a case by case basis to ensure it is manageable. The TEC is writing to OTEPs about their specific situation.

Which OTEPs are affected?

The funding changes will be managed on a case by case basis. The only OTEPs affected from 2011 are Literacy Aotearoa, the New Zealand Childcare Association, Te Kura Toi Whakaari o Aotearoa: New Zealand Drama School and The Institute of Professional Legal Studies.

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Capability funding

What is capability funding?

Capability funding is funding that is not tied to specific outputs, or funds lower priority activity.

It is not aligned with the Government’s direction for tertiary funding, as it is often characterised by high compliance costs and high levels of central steering.

What happens to capability funding as a result of Budget 2010?

The Tertiary Education Organisation Component (TEOC) Capability Fund is being disestablished. Funds to be disestablished at the end of 2010 are:

• Supporting Change ($35.556m)
• Capability funding to support ITPs and wānanga make changes to provision to align with government priorities
• Encouraging and Supporting Innovation ($8.711m)
• Contestable funding to promote innovation in the tertiary education sector
• ITP Business Link Fund ($6.133m)
• Capability funding to support ITPs develop links with local business and industry
• Base Grant ($7.206m)
• Contribution to support the costs of operating a Tertiary Education Institution (TEI) Council or Board

Existing contractual TEOC funding commitments will be honoured.

Why is this happening?

The Government wants to focus taxpayers’ funding fully on the outcome people expect from the tertiary sector, which is academic results for students.

By shifting capability funding into student funding, the Government is allowing institutions to best determine how to structure themselves to provide their services.

The Government is confident that items that were previously supported with capability grants are now core business in the sector.

What about the remainder of capability funding?

Where individual capability funds support high priority activity, they are being either fully or partly retained. Full funding is retained for $14.6 million of Equity Loading; $1 million is retained from the ITO Strategic Leadership Fund to assist development of higher level qualifications; and the full $1.5 million from the Priorities for Focus: Wānanga Research fund - to assist wānanga to develop research capability.

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Course fees

Why is government concerned with course fees?

Tuition fees are highly subsidised by taxpayers to help keep tertiary education affordable for all students. While providers need some flexibility to increase fees, it is important those increases are in response to actual cost pressures, and don’t frustrate the intention of the government’s fee subsidy policy.

What happens to student fees?

The Government has simplified the fee regulation policy by replacing the Fee and Course Costs Maxima, Annual Fee Movement Limit and Postgraduate Fee Increase Limit with one Annual Maximum Fee Movement (AMFM) for all courses at all levels.

Tertiary education providers will be allowed to increase fees and compulsory course costs for all government-funded courses by up to 4% in 2011. The 4% applies to the GST exclusive amount. This change will give students more certainty about future study costs.

There remain two exemptions to the AMFM:

• Professional postgraduate courses remain exempt (eg MBAs)
• Fees under $444.44 (GST exclusive) can be increased to $444.44 or by 4%, whichever is the greater.

In addition, the exceptions policy (where fees for a limited number of courses can increase by up to 8%) will be extended to PTEs and OTEPs. Further details of this policy will be made available soon.

Why has this change occurred?

The purpose of this change is to remove the distortive effects of the previous policy, which meant that providers with higher cost courses (with fees at or above the maxima) were unable to make increases in fees to off-set the increases in the cost of provision.

How does this differ from the old fee regulation policy?

The old fee regulation rules were difficult to administer and hard for people to understand.

For undergraduate courses:

• If fees were below the maxima, they could increase by 5% per year.
• If fees were at the maxima, they could increase by the rate of inflation.
• If fees were above the maxima, they couldn’t increase.

Postgraduate courses were able to increase by $500 per year.

Why are there any restrictions at all on what tertiary education providers can charge for their courses?

Regulation of tertiary education fees is necessary to ensure that increases to government tuition subsidies are reflected in lower fees for students, rather than being absorbed by providers.

How does the increase in GST impact on fees?

The 4% increase applies to the GST exclusive figure.

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Overall student support changes

What can students currently borrow for?

Student loans are intended to make sure that money is not a barrier to students being able to undertake tertiary education. Students are able to borrow for their course fees, up to $1,000 to cover course related costs, and $163.38 per week to contribute to their living costs. These loans are interest-free and only need to be repaid once the borrower is earning above $19,084 per year. The Government remains committed to interest-free student loans.

What are the student support changes?

The Government is:

• introducing a performance element to the Student Loan Scheme that will mean that students must pass at least half their course load to retain eligibility for a student loan
• requiring permanent residents and Australians to wait two years before they can get a student loan
• placing a life-time limit on access to student loans of seven equivalent full-time student units. In some circumstances there will be an additional entitlement, to an overall maximum of 10 EFTS to support higher level study
• increasing the StudyLink student loan administration fee from $50 to $60 and introducing a new $40 annual Inland Revenue account fee which applies once study is completed, to cover more of the actual costs of administration over the life of the loan
• limiting eligibility for student allowances at secondary school to 92 weeks (two school years), and removing exemptions to the student allowances life-time entitlement for tertiary transition courses or other particular courses
• clarifying the Student Allowances Regulations to exclude eligibility for Superannuitants and Veteran’s Pensioners.

Why is the Government doing this?

Measures to reform the student support system in Budget 2010 will improve accountability of the tertiary sector and boost educational performance.

The changes we are making will encourage better results and give taxpayers a better return on their investment in the education of our tertiary students.

The package of measures will also help students avoid ‘double jeopardy’ - where they can incur high levels of debt without gaining a qualification and the resulting higher-paying job that helps them pay the debt off.

How much money does the package save?

The package saves around $292 million in operating expenditure over four years.

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Student loans

Student loan performance element

Why is the Government doing this?

This policy provides an incentive for people to perform in order to retain eligibility for student loans. When people take out a student loan, but fail to gain a qualification, they incur costs for themselves and the Government without any real gain.

How and when will student academic performance be assessed?

When a student takes out a student loan, they will not have their performance assessed until they have completed 1.6 EFTS units. This is generally about two full-time years of study.

At that point, to continue borrowing under the student loan scheme, they must have passed at least 50% of their course load - the number of EFTS units passed must at least equal the number of EFTS units failed if they want to retain their student loan eligibility. A student’s performance will be assessed for all future loan applications.

The assessment of performance will use a rolling five year assessment period, so poor performance from much earlier study will not affect eligibility.

What is an EFTS?

EFTS stands for Equivalent Full Time Student. It is a measurement of the amount of study, or the workload, involved in undertaking a particular course. A year of full-time study is usually between 0.8 EFTS and 1.2 EFTS. If you are unsure about the EFTS value of your course then you should talk to your education provider.

When will the assessment of performance begin?

The policy comes into effect on 1 January 2011, with the assessment of performance based on courses ending in 2009 and after. This means that some borrowers may lose eligibility for student loans in 2011.

What happens when a student has a valid personal reason for failing a high number of courses prior to the policy being announced?

Where students believe they have extenuating personal circumstances that have led them to perform poorly they are able to apply to StudyLink for an exemption.

These exemptions will be made at StudyLink’s discretion.

What happens when a student fails all their courses in 2009 but has improved this year and passed most, but not all of them. Under the new policy will they still have access to the loan system?

We acknowledge that there is an element of retrospectivity in this policy change. Where students who performed poorly in 2009 but have subsequently showed significantly improved academic performance overall (but still have not passed 50% of their EFTS over the qualifying time period), they will be able to apply to StudyLink for an exemption as mentioned above.

Will student performance count for study undertaken without a student loan?

Yes. Academic performance will count irrespective of whether students have taken out a student loan, but only from the first year since 2009 that they accessed a loan.

How can students get their student loan back?

Students will be able to regain eligibility to student loans if they continue to study and pass enough courses until the number of EFTS passed is equal or greater than the number of EFTS failed.

Students who do not continue to study will be able to regain eligibility after five years as a result of the five year rolling assessment period.

What support will be available to students who can’t get a student loan?

Students will need to meet the costs of their study themselves. However, they will not be prevented from accessing tertiary education and their fees will still be subsidised.

What are the savings associated with this policy?

The savings of this policy are estimated to be $137.8 million over four years.

How will the performance element be administered by StudyLink?

Students will be asked to make a declaration concerning their performance history. Student performance will be audited by StudyLink.

What will happen if students make a false declaration (either intentionally or unintentionally) to StudyLink about their academic performance?

There will be consequences for those who are found to have made a false declaration and have failed to meet the performance criteria. These students will also lose their entitlement to a student loan and will have to earn their entitlement back.

Will students be disadvantaged if they are studying part-time?

No. Performance will not be evaluated until students have completed a total of 1.6 EFTS of study, irrespective of whether they are part-time or full-time.

How does this change relate to linking provider funding to performance?

In future, tertiary education institutions will receive some of their funding based on how well students perform academically each year. This will encourage institutions to better respond to, and support, those students who are struggling.

Educational performance will be measured using indicators like:

• qualification completion
• successful course completion
• student progression to further study.

Further details on performance-based funding will be announced in due course.

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Two year stand-down for student loans for permanent residents and Australians

Why is the Government doing this?

Ministry of Education data shows that permanent residents and Australians who take out a student loan are more likely than New Zealand citizens to leave New Zealand with a student loan debt.

Of New Zealand borrowers who left study in 2000 and still had a loan on 31 March 2009, 30% were overseas in 2008/09. This compares to 45% of permanent residents and 68% of Australians. In other words, of the students who left study in 2000 and still have a loan, a permanent resident is 1.5 times more likely to be overseas than a New Zealand citizen.

Of those borrowers who go overseas, there is a greater likelihood that permanent residents and Australians will remain overseas and never return to New Zealand. This means they are less likely to contribute to the New Zealand economy and repay their loans. Their lower repayment rates also mean that the value of their loans to the Government is reduced.

This new policy asks permanent residents and Australians to demonstrate their commitment to working and living in New Zealand before being able to access student loans.

The policy also brings New Zealand student support into closer, but not exact, alignment with that of New Zealanders in Australia (ie New Zealanders are not eligible for the Australian student loan scheme). It also aligns the Student Loan Scheme with the Student Allowances Scheme and the benefit system (eg the unemployment benefit), which typically require applicants to be both ordinarily resident and have resided in New Zealand for two years.

Are there any exceptions to this policy?

Yes. This policy will be similar to the Student Allowances policy, which provides an exemption to the stand-down for refugees. In addition, people who are sponsored into New Zealand by a family member who gained residence on account of their refugee status will also be exempt from the two year stand-down for both loans and allowances. A protected person under the Immigration Act 2008 will also be exempt for student loans and allowances.

When does it come into effect?

The policy comes into effect on 1 January 2011.

Are there any grandparenting arrangements?

Yes. A student could be grandparented through the qualification they are currently undertaking until they meet the two year stand-down or for a maximum of two years – whichever is earlier.

How much will this policy save the Government?

This policy will have an estimated four year operating saving of $79.2 million.

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Student loan life-time limit

What is the life-time limit and when will it begin?

The seven EFTS count will begin for study commencing on or after 1 January 2010. It is unlikely that the seven EFTS life-time limit will be reached until 2016 for most existing borrowers. This should give adequate time for students to organise their study to ensure they can borrow for the remainder of their planned studies.

What is the rationale for this policy?

The policy aims to encourage students to make wise decisions about where and what to study. The policy should encourage students to take the most direct route through their studies to ensure they have sufficient entitlement to a student loan.

What is an EFTS?

EFTS stands for Equivalent Full Time Student. It is a measurement of the amount of study, or the workload, involved in undertaking a particular course. A year of full-time study is usually between 0.8 EFTS and 1.2 EFTS. If you are unsure about the EFTS value of your course then you should talk to your education provider.

Will there be any additional entitlement?

Yes, in the following circumstances:

• A student who is approaching the seven EFTS limit will be able to enrol and complete a further course or paper that would take them over the seven EFTS limit if they are close to finishing

• There will be an additional entitlement of up to three EFTS to undertake doctoral study and one EFTS to complete other post-graduate qualifications. A borrower may receive extra entitlement under each of these exceptions only once, but with a maximum possible life-time entitlement of 10 EFTS (plus any extra they received to take them over their seven EFTS entitlement).

What are the impacts of the policy?

It is estimated that this policy will affect 50 borrowers in 2013/14, and up to 250 people in 2014/15.

What happens if a student uses up all their entitlement?

These students will need to meet the costs of their study themselves. However, students will not be prevented from accessing tertiary education and their fees will still be subsidised.

How much will this policy save the Government?

If the policy was fully implemented today, it would generate an operating impact saving of $1.9m.

Will part-time students be disadvantaged?

Part-time students will not be disadvantaged under this policy. This is because the life-time limit is based on the amount of study (EFTS), rather than the length of study undertaken.

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Changes to the Student Loan Scheme administration fee

What are the changes to the Student Loan administration fee?

The student loan administration fee structure will be changed as follows.

• The StudyLink student loan establishment fee (formerly known as the administration fee) will increase from $50 to $60. This policy will be implemented for every new loan account that is established from 1 January 2011.
• An annual Inland Revenue administration fee of $40 will be introduced. This fee will apply once people have finished studying. Inland Revenue will charge the administration fee at the end of the tax year, with the first fee being charged on 31 March 2012 for the 2011/12 tax year.
• No student will be charged the Inland Revenue administration fee if a StudyLink establishment fee has been charged in the same tax year.

Why is the Government making changes to the administration fee structure?

The StudyLink fee has not increased since the Student Loan Scheme was established. As such, the proportion of the administration costs that the government meets has increased over time. The introduction of this policy will allow the government to recover more of the costs of administering the Student Loan Scheme.

The ongoing annual fee, charged while loans are being repaid, reflects that it costs money to keep each account open each year, regardless of the loan balance.

How will the Inland Revenue fee be charged?

The Inland Revenue fee will:

• be a fixed fee
• be a flat fee
• be added to the student loan balance rather than the repayment obligation
• not be charged on any loan that had been fully repaid during the tax year
• not apply to any loan balances of less than $20 as these are automatically written off
• not be subject to any discretion to waive it.

How many people will be affected by this policy change?

This policy will impact on everyone who has a current student loan. It is estimated that in 2011/12 around 200,000 borrowers will be charged the StudyLink establishment fee, and around 500,000 borrowers will be charged the Inland Revenue administration fee.

How much are the savings for the Government from these changes?

The increase to the StudyLink establishment fee will have an estimated four year operating saving of $2.2 million. The introduction of an Inland Revenue administration fee will have an estimated four year operating saving of $62.8 million.

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Changes to Student Allowances Regulations

What changes are being made to the Student Allowances Regulations?

The Government is making several changes to tidy up the Student Allowances Regulations from 1 January 2011.

• Student allowances eligibility for study at secondary school will be limited to a total of 92 weeks (or two school years). Students will also still continue to be eligible to a life-time limit of 200 weeks in tertiary study.
• The exemption to the general student allowances life-time limit for tertiary transition courses will be removed.
• A provision which allows the Chief Executive of the Ministry of Social Development (MSD) to grant an exemption to the life-time limit for a particular course, will be repealed.
• The Student Allowances Regulations will be clarified to remove eligibility for Superannuitants and Veteran’s Pensioners.

Why are these changes being made?

The changes are being made for the following reasons.

• Secondary school study – This initiative removes a loophole where secondary school students are able to receive allowances for extended periods of time without progressing to tertiary study. The number of people receiving student allowances for three or more years of secondary school study increased from 68 in May 2008 to 153 in May 2009. Six adult students had been receiving student allowances for 10 or more years (up from three for the same time in 2008).
• Tertiary transition courses – The rationale for retaining the provision has weakened due to: changes to student loans, which are now interest free for those living in New Zealand; and shifts in adult foundation provision, which have moved over time into existing Certificate-level qualifications rather than separate courses. The exemption set out in Regulation 20(5) has only been used a few times over the last decade, and the complexities of re-establishing an administrative process are likely to outweigh the benefits.
• Other exemptions provided for by the Chief Executive of MSD – Regulation 20(5) allows the Chief Executive of MSD to grant an exemption to the 200 week limit for student allowances for a particular course. The intention of this provision is unclear, and it has never been exercised.
• Superannuitants and Veteran’s Pensioners – This initiative closes a loophole where superannuitants and veteran’s pensioners could be eligible for a student allowance. This loophole arose when the personal income limit for allowances was changed in 2006. Closing the loophole is consistent with the principle that people should receive no more than one source of state support for their living expenses.

Why was 92 weeks chosen for secondary school student allowances eligibility?

It was considered that 92 weeks (two school years) would provide reasonable financial support for 16 or 17 year olds who have children, and returning adult students undertaking secondary school study. Up until 31 May 2008, less than 5% of allowance recipients at secondary school received an allowance for more than two years. As at 31 May 2009, this proportion had grown to 18 percent.

What are the savings generated by these initiatives?

The four year operating savings for:

• restricting student allowances eligibility for study at secondary school is estimated to be $11.39 million
• excluding superannuitants and veteran’s pensioners from student allowances is estimated to be $282,000.