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Tertiary education initiatives and savings

Details of the main tertiary education initiatives and savings announced by the Government in Budget 2012.

Initiative Description
Increasing the size of the Performance-Based Research Fund

Operating funding
  • 2012/13 $6.250m
  • 2013/14 $18.750m
  • 2014/15 $31.250m
  • 2015/16 $43.750m
Four year total: $100.000m		 Increased funding to strengthen tertiary education research through maintaining quality of research-led teaching and growing research.  The Performance-Based Research Fund will grow to $300 million per year by 2016.
Increase funding rates for engineering

Operating funding
  • 2012/13 $5.990m
  • 2013/14 $11.990m
  • 2014/15 $11.990m
  • 2015/16 $11.990m
Four year total: $41.960m		 Shifts engineering and related technologies from its current funding category (category C) into a higher cost category (category N) to create incentives for providers to increase the number of engineering graduates.
Increase funding rates for science

Operating funding
  • 2012/13 $2.427m
  • 2013/14 $4.853m
  • 2014/15 $4.853m
  • 2015/16 $4.853m
Four year total: $16.986m		 Increases funding rates for science tertiary education by 2% to preserve quality of science education.
Reducing the funding rate difference between public and private providers

Operating funding
  • 2012/13 $4.218m
  • 2013/14 $8.431m
  • 2014/15 $8.427m
  • 2015/16 $8.427m
Four year total: $29.503m		 Advancing the Government’s policy of reducing differences in funding policy between Private Tertiary Establishments and Tertiary Education Institutions, by halving the current difference in funding rates.
Extend the Youth Guarantee

Operating funding
  • 2012/13 $2.859m
  • 2013/14 $8.576m
  • 2014/15 $12.579m
  • 2015/16 $13.722m
Four year total: $37.736m		 Providing additional fees-free tertiary places in the Youth Guarantee over and above the Government’s commitment to deliver 12,500 places in the Youth Guarantee by 2014.

Student loan savings within Vote Social Development and Vote Revenue will be created from converting fee-paying tertiary places to fees-free Youth Guarantee places.
Fixing a 4% Annual Maximum Fee Movement in 2015 and 2016

Operating funding
  • 2012/13 $ -
  • 2013/14 $ -
  • 2014/15 $7.669m
  • 2015/16 $16.609m
Four year total: $24.278m

Capital funding
  • 2012/13 $ -
  • 2013/14 $ -
  • 2014/15 $14.235m
  • 2015/16 $31.070m
Four year total: $45.305m

Funding appropriated to or savings from:
  • Vote Social Development; and
  • Vote Revenue.
 This initiative provides sufficient funding for the Government to decide on Annual Maximum Fee Movements of up to 4% in 2015 and 2016. Previously, sufficient funding was appropriated for Annual Maximum Fee Movements of up to 4% until 2015.

The Government has decided that an Annual Maximum Fee Movement of 4% will apply in 2013. The Annual Maximum Fee Movements for subsequent years will be decided at each Budget.
New Zealand benchmarking tool

Operating funding
  • 2012/13 $1.260m
  • 2013/14 $1.260m
  • 2014/15 $ -
  • 2015/16 $ -
Two year total: $2.520m		 Supports Tertiary Education Institutions to benchmark their financial and educational performance against other comparable institutions after current funding expires in June 2012.
Programme for International Assessment of Adult Competencies

Operating funding
  • 2012/13 $0.850m
  • 2013/14 $1.560m
  • 2014/15 $2.520m
  • 2015/16 $0.330m
Four year total: $5.260m		 Funds New Zealand's participation in the Programme for International Assessment of Adult Competencies (PIAAC), an OECD international survey of the skills of 16-65 year olds, to be undertaken ten-yearly, to refresh the evidence base on New Zealand’s adult literacy, numeracy, and workplace skills, and skills internationally.
Tutor support for special education

Operating funding
  • 2012/13 $0.617m
  • 2013/14 $0.635m
  • 2014/15 $0.704m
  • 2015/16 $0.671m
Four year total: $2.627m		 Allow tutor support for special education to continue, and double the number of students who can participate to match current demand. The Special Education Special Supplementary Grant (SSG) was removed (with the exception of tutor support funding) as part of rationalising small funds in Budget 2009.
Adult and Community Education in Communities

Operating funding
  • 2012/13 $0.300m
  • 2013/14 $0.500m
  • 2014/15 $0.700m
  • 2015/16 $0.700m
Four year total: $2.200m		 Increased funding for Adult and Community Education (ACE) in Communities. ACE is informal education for adults who are unable to commit to more formal education options.
Increasing the subsidy for pilot training

Operating funding
  • 2012/13 $0.234m
  • 2013/14 $0.408m
  • 2014/15 $0.408m
  • 2015/16 $0.408m
Four year total: $1.458m

Funding also appropriated to Vote Social Development.		 Increasing pilot training tuition subsidy by moving pilot training provision into funding category M to help realign fees and subsidies in aviation. Includes operational funding for the Tertiary Education Commission in 2012/13 to implement pilot training changes.

Student loan savings within Vote Social Development and Vote Revenue will be created from setting a per-EFTS Student Loan Borrowing Limit for pilot training.

Budget 2012 education savings and reprioritisations

Tertiary education

Initiative Description
Funding not required for literacy, language and numeracy top-ups

Savings rationale:

This funding is no longer required at levels 1-2, for which new funding arrangements will be put into place.  The funding was designed to be short term, to build institutional capability to offer quality literacy and numeracy at levels 1-3.  It was introduced in 2008.

Four year total savings: $22.397m		 Remove low-priority funding no longer required for embedding literacy and numeracy into level 1-2 tertiary education programmes.
Remove funding for Adult and Community Education in universities

Savings rationale:

From 1 January 2013, funding for Adult and Community Education (ACE) in universities will no longer be available. Universities are expected to focus on degree level education and above. Adult and Community Education funding will continue to be available to Institutes of Technology and Polytechnics, wānanga, private training establishments, community organisations, and rural education activities providers.

Four year total savings: $5.401m		 Removing Adult and Community Education funding for universities which is a relatively low priority for government expenditure and not well aligned to core university roles.
Managing demand pressure at universities in 2013

Operating funding
  • 2011/12 ($8.912m)
  • 2012/13 $4.456m
  • 2013/14 $4.456m
  • 2014/15 $ -
  • 2015/16 $ -
Four year total: $8.912m		 Fiscally neutral adjustment to fund demand at universities in 2013 only. Funding is transferred from unspent industry training funding from 2011.
Setting a per-Equivalent Full-Time Student (EFTS) loan borrowing limit for pilot training

Savings rationale:

From 2013, a per-equivalent full time student (EFTS) lending cap of $35,000 will be placed on borrowing under the student loan scheme for compulsory fees for pilot training. These changes will only apply to students beginning their qualification on or after 1 January 2013. This is to address the large student loans and poor repayment records of aviation students, with median repayment times for aviation students approximately double that of other borrowers.

Four year total savings:
  • $7.779m (operating)
  • $18.035m (capital)
Funding appropriated to or savings from:
  • Vote Social Development; and
  • Vote Revenue
 This initiative limits the amount of compulsory fee component borrowing from the Student Loan Scheme for pilot training students to $35,000 (including GST) per -EFTS. The policy will apply to the fee borrowing for study for pilot training commencing on or after 1 January 2013.

Student support

Initiative Description
Increasing the student loan repayment rate from 10% to 12%

Savings rationale:

Increasing the repayment rate will help the Government to reduce the cost of the Student Loan Scheme at a time of significant fiscal pressure. The current cost of new lending for Government is 44.60 cents in the dollar (this means that for every dollar borrowed, the Government will only receive 55.40 cents of value in return).

The current 10 cent rate has not changed since the beginning of the Student Loan Scheme, despite the introduction of the interest-free policy which has resulted in decreased voluntary student loan repayments.

The income-contingent design of the Student Loan Scheme means that those who gain a higher private benefit from their study have a higher repayment obligation.

Four year total savings:
  • $184.190m (operating)
  • $513.248m (capital)
Savings from:
  • Vote Social Development; and
  • Vote Revenue
 From 1 April 2013, borrowers with earnings in excess of the repayment threshold will be required to make repayments at a rate of 12 cents in the dollar. The current repayment rate is 10 cents in the dollar.
Broadening the definition of income for student loan repayment purposes

Savings rationale:

The Student Loan Scheme is an income-contingent scheme meaning that the amount that a borrower has to repay in any year is dependent on the borrower’s income from salary and wages, interest and dividends and other income such as business profits.

However, for borrowers who derive other types of income, the current definition of income may not reflect their actual earnings or financial resources that are available to meet their repayment obligation. 

Broadening the definition of income to better align with that used for Working for Families also ensures there is better consistency across all social policy initiatives to improve the integrity of the social assistance system.

Four year total savings:
  • $3.082m (operating)
  • $0.999m (capital)
Savings from Vote Revenue.		 The definition of income for student loan repayment purposes will be broadened. This rule will apply from 1 April 2014 for the 2014/15 tax year.
Setting a 2 EFTS annual student loan borrowing limit

Savings rationale:

The Government is concerned that some students are borrowing for a large amount of study in one year, at a high cost to themselves and to the taxpayer.

Limiting the amount of EFTS which can be borrowed for in one year will reduce high course withdrawals and poor performance for students who borrow for high EFTS in one year.

Four year total savings:
  • ($0.078m) (operating)
  • $0.221m (capital)
Funding appropriated to or Savings from:
  • Vote Social Development; and
  • Vote Revenue
 This initiative limits the amount of loan-supported study that can be undertaken in a year to 2 Equivalent Full-Time Student (EFTS) units. The policy will take effect for study starting on or after 1 January 2013.
Repealing the Student Loan Voluntary Repayment Bonus

Savings rationale:

  • The preliminary assessment is that the level of savings from the voluntary repayment bonus is lower than originally estimated, and the bonus may not be providing good value to the Government. 
  • The take-up of the policy has largely been by individuals who were already paying back their loans quickly and not from those who were slower to repay their student loans. The bonus also appeared to be encouraging some students to borrow when they did not need to do so. For example, a group of borrowers were using the scheme effectively to discount their annual fees which was not the intention of the policy. 
  • In 2011, 2,611 borrowers repaid their student loans in the same year they borrowed, receiving $1.8m in bonuses (from approximately $13m of annual bonus payments). This results in a cost to the Government.
Four year total savings:
  • $43.492m (operating)
  • ($39.514m) (capital)
Funding appropriated to or savings from:
  • Vote Social Development; and
  • Vote Revenue
 The student loan voluntary repayment scheme will be repealed. The policy will take effect from 1 April 2013.
No CPI adjustments to student allowance parental income thresholds for 4 years

Savings rationale:

Government expenditure on student allowances has increased by 62% between 2007/08 and 2010/11. Part of this increase can be attributed to significant increases to the student allowance parental income threshold in the 2000s.

The student allowance parental income threshold has increased well ahead of wage growth and inflation. In 1992, the threshold was $26,832, which is $42,049 in 2011 dollars. This compares to the current threshold of $55,027.96.

This policy seeks to reduce the growth in allowance expenditure, as the Government looks to better target allowance support to those students who need it most.

Four year total savings:
  • $12.662m (operating)
  • ($16.441m) (capital)
Funding appropriated to or savings from:
  • Vote Social Development; and
  • Vote Revenue
 From 1 April 2012 to 31 March 2016 the parental income thresholds will not be increased annually by CPI.
Removing student allowance eligibility for postgraduate study and long programmes

Savings rationale:

Evidence shows that a student's first year in tertiary education is the most important for ensuring successful completion of a qualification. Removing allowance eligibility for postgraduate study will refocus allowances on students' initial years of study, when they most need additional support, and will update allowance policy settings to reflect the wide availability of interest free student loans.

Expecting postgraduate students to borrow to fund their study also reflects the higher private benefit gained from postgraduate study. Among young domestic graduates last enrolled in tertiary education in 2003, median annual earnings three years after completing their studies were 16% higher for those with a master’s degree compared with those with a bachelor’s degree, and 46% percent higher for those with a doctorate —more than twice the national median income.

Four year total savings:
  • $32.986m (operating)
  • ($72.283m) (capital)
Funding appropriated to or savings from:
  • Vote Social Development; and
  • Vote Revenue
 For study starting 1 January 2013, student allowance eligibility for level 8 postgraduate qualifications and Long Programmes, other than bachelor qualifications with honours, will be removed. Other exemptions will be narrowed or removed. Transitional arrangements will be in place for some recipients.

Need more information?

More information on Budget 2012 changes to teriary education and student support is available on the following websites:

Content last updated: 24 July 2012

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