New report asks who should pay for tertiary education

Reducing the share of tertiary education tuition costs borne by taxpayers and abandoning the tertiary institution fee maxima are two key proposals in an Education Forum report released today.

The report, Who Should Pay? - Tuition Fees and Tertiary Education Financing in New Zealand, was written by Norman LaRocque, a policy adviser with the New Zealand Business Roundtable and an adviser to the Education Forum.

It looks at tertiary education funding trends in New Zealand and overseas to find best practice policies for improving access to, and results from, tertiary education.

The report shows that New Zealand's 'market-based' reforms, now slowly being unwound by the government, are part of a world-wide move toward greater private tertiary education financing through tuition fees, reduced emphasis on grants in favour of student loans and an increase in private education provision.

"Recent government policies of fee maxima from 2004, more concessional student loans and increases in across the board tuition subsidies cost a bundle, but will do little to improve opportunity for traditionally disadvantaged groups, such as Maori or those on low incomes. They also run contrary to the steps being taken by many other OECD countries to improve tertiary education," said Mr LaRocque.

"The evidence suggests that concerns about access to tertiary education are better addressed through initiatives at earlier levels of education and through targeted assistance at the tertiary education level."

The report also debunks the argument that taxpayers, rather than students, should foot more of the bill for tertiary education.

"If it is unfair for students to pay more of the cost, as some argue, then it is even more unfair to ask taxpayers to foot the bill given that students are, on average, from wealthier households than taxpayers generally and that students enjoy the bulk of the benefits from tertiary education, including higher lifetime earnings," Mr LaRocque said.

A key to financing tertiary education is increasing the growth rate of the economy, not more taxation.

"The fact is that we cannot hope to finance our tertiary institutions at first world levels while we remain a low middle-income country," said Mr LaRocque.

Relative to other levels of education in New Zealand, the $10,000+ per EFTS subsidy (including the cost of student loans and allowances) to tertiary education is high. Tertiary education in New Zealand is also well-funded relative to the country's ability to pay, with total spending (public and private) on tertiary education institutions relative to per capita gross domestic product being second only to the United States.

"These realities need to be kept in mind when considering calls for additional taxation or government funding," said Mr LaRocque.

"New Zealand universities and other tertiary institutions cannot hope to use their resources wisely, and be internationally competitive for academic staff, as long as they are subject to arbitrary fee caps, creeping centralisation and remain largely reliant on government funding. That can only lead to a decline in the quality of courses, to the detriment of current and future students," Mr LaRocque said.

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