Funding for tertiary education in New Zealand is through a combination of government subsidies and student fees. The government funds approved courses by a tuition grant based on the number of enrolled students in each course and the amount of study time each course requires. Courses are rated on an equivalent full-time Student (EFTS) basis. Students enrolled in courses can access student loans and student allowances to assist with fees and living costs.
Funding for tertiary institutions has been criticised recently due to high fees and funding not keeping pace with costs or inflation. Some also point out that high fees are leading to skills shortages in New Zealand as high costs discourage participation and graduating students seek well paying jobs off shore to pay for their student loans debts. As a result, education funding has been undergoing an ongoing review in recent years.
Students
Most tertiary education students rely on some form of state funding to pay for their tuition and living expenses. Mostly, students rely on state provided student loans and allowances. Secondary school students sitting the state run examinations are awarded scholarships, depending on their results, that assist in paying some tuition fees. Universities and other funders also provide scholarships or funding grants to promising students, though mostly at a postgraduate level. Some employers will also assist their employees to study (full-time or part-time) towards a qualification that is relevant to their work. People who receive state welfare benefits and are retraining, or returning to the workforce after raising children, may be eligible for supplementary assistance, however students already in full or part-time study are not eligible for most state welfare benefits.
Since National came to power in 2008, there have been a considerable number of changes made to the tertiary education sector.
Student allowances
Student Allowances, which are non-refundable grants to students of limited means, are means tested and the weekly amount granted depends on residential and citizenship qualifications, age, location, marital status, dependent children as well as personal, spousal or parental income. The allowance is intended for living expenses, so most students receiving an allowance will still need a student loan to pay for their tuition fees.
Student loans
The Student Loan Scheme is available to all New Zealand citizens and permanent residents. It covers course fees, course related expenses, and can also provide a weekly living allowance for full-time students. The loan must be repaid at a rate dependent on income and repayments are normally recovered via the income tax system by wage deductions. Low income earners and students in full-time study can have the interest on their loans written off.
On 26 July 2005, the Labour Party announced that they would abolish interest on Student Loans, if re-elected at the 2005 general election, which they were. From April 2006, the interest component on Student Loans was abolished for students who live in New Zealand. This has eased pressure on the government from current students. However, it has caused resentment from past students many of whom have accumulated large interests amounts in the years 1992-2006. The National Party initially opposed the interest free loans policy, but after it lost the 2005 election, in early 2008 said it would keep interest off student loans.
The Fifth National Government has to date kept interest off loans, but has increased the repayment rate from 10 to 12 per cent and reduced eligibility for the loans.