National loan position barrier to tertiary quality

Education Forum Media Release

31 January 2007

National's student loan position a barrier to tertiary education quality
The National Party announcement that, if elected, it will not reverse Labour’s ‘no interest’ student loan policy will see the continuation of an unaffordable and wasteful tertiary education policy whatever the election result, says the Education Forum.

Education Forum policy advisor Norman LaRocque said National’s backtrack means it has missed a chance to directly address the problems caused by the interest write-off policy: little incentive to repay loans, disproportionate benefits to better-off students and financial barriers to the quality and performance of the tertiary education sector.

Mr LaRocque said National’s proposal for a repayment incentive was a band-aid that would increase the loan scheme’s administration costs.

“It may result in some students repaying their loans earlier, but it will be expensive and result in an increasingly complex student loan scheme,” said Mr. LaRocque.

The policy announcement should also be of concern to groups seeking increased government investment in tertiary education.

“The ‘no interest’ policy has a high opportunity cost – money used to pay for interest write-offs cannot be spent on increasing teaching and research resources at New Zealand tertiary institutions.”

The policy also contributes to the fact that New Zealand spends a much greater amount of its tertiary education budget on student assistance (44% in New Zealand versus 35% in Australia, 19% in Canada, 24% in the United Kingdom and 18% in the United States), rather than on direct expenditure on tertiary institutions.

Mr LaRocque said that giving free money to students at the expense of tertiary institutions could leave institutions unable to to hire good staff.

“Those who are concerned about the New Zealand tertiary education sector’s ability to compete in an increasingly competitive global market should be calling on both major political parties to rethink their student loan policies as part of a broader review of tertiary education financing,” Mr LaRocque said.

ENDS

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