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The Government is scrapping first-year fees free: What you need to know

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By Katie Kenny of RNZ

ExplainerThe new government plans to change the policy that since 2018 has covered eligible students’ fees for the first year of tertiary studies. Instead, the Government will cover final-year fees.

Details beyond that are scant. But one thing is clear: There will be no “double-dipping” for those who have already benefitted.

The change is in line with NZ First’s election-year manifesto.

The National Party has criticised the fees-free scheme since its introduction. However, the party changed its tune in the lead-up to the election, saying it would keep the policy.

Meanwhile, the Act Party campaigned on abolishing it, saying it had “minimal impact on the number of tertiary enrolments”.

The country’s tertiary education system continues to report financial stress, falling domestic enrolments, and long-standing equity issues. So, what do we know about the impact of the current settings and the potential effect of the proposed change?

Background

A Labour Party promise, the fees-free tertiary education and training scheme was introduced on January 1, 2018. It covers fees for first-time learners in their first year of provider-based study or their first two years of work-based training, up to $12,000. Certain eligibility criteria apply.

It aims to make tertiary education and training “affordable for all”, according to the Tertiary Education Commission, which administers the policy.

Labour had campaigned on covering two years of academic study in 2021 and three by 2024. But in 2020, the planned expansion of the scheme was paused indefinitely.

Then-education spokesman Chris Hipkins said additional funding would be spent in areas “critical for the country’s economic recovery in the post-Covid environment”.

Measuring success

A monitoring framework measures the policy’s success in three areas: improving access and affordability, improving education outcomes, and fiscal control and cost-effectiveness.

From the get-go, the number of enrolments fell short of what Labour had expected. And the number of new fees-free students and trainees has been decreasing.

In 2019, then-Education Minister Hipkins said the policy appeared to have “stabilised a decline of overall student and trainee enrolment numbers of the past four years”.

The Herald last year reported the number of decile 1 students in first-year tertiary study has halved since the policy started, with students from wealthier backgrounds making up an increasingly greater share.

Government data shows bachelors-level students made up two-thirds of fees-free enrolments. Most were aged 18 to 19 years. And most were European.

And the “parity gap” has increased, according to a summary on educational performance indicators, as the qualification completion rate fell for Māori and Pacific peoples in 2022.

In the 15-24 age group, the percentage of adults with a tertiary certificate or diploma has remained at 15 per cent since 2018, and the percentage with a bachelor’s degree or higher has increased slightly from 8 per cent in 2018 to 9 per cent in 2019, 2020, and 2021.

Since 1992, 1.47 million people have taken out a student loan, borrowing a total of $32.9 billion. Nearly $22b has been repaid.

Since 2017, the amount drawn for fees has decreased, while the amount for living costs has increased. The median loan balance on leaving study in 2021 was $21,513. This was less than the previous year ($22,480) and 2019 ($22,299).

The country’s tertiary education system continues to report financial stress. Photo / 123rf
The country’s tertiary education system continues to report financial stress. Photo / 123rf

The goal

The motivation for the change hasn’t been made clear. Presumably, funding the final – rather than the first year – of study will act as an incentive for students. Plus, it will reduce costs.

Penny Simmons, Minister for Tertiary Education and Skills, said the new settings will apply from 2025. “Final decisions on the design of the new scheme have yet to be taken and I expect that they will be included as part of Budget 2024 announcements.”

But she confirmed: “There will be no opportunity for double-dipping.”

Ministry of Education acting policy leader Andrea Schollmann told RNZ development of the policy is “under way” and “details are being determined”.

Finance Minister Nicola Willis has said the change will help the Government save money.

A total of $347.1 million was spent on fees-free payments in the year ending June 30, 2023. That was $40m below budget, owing to lower student numbers. The first year retention rate – meaning the proportion of students in a cohort who enrol for another year of study after their first – has hovered around 74 per cent since 2016.

The nearly one in every four students who aren’t retained may save the Government $90m or so a year, after the policy change.

“Every dollar counts,” Infometrics chief executive and principal economist Brad Olsen said.

Although the decile system is a “crude metric”, Olsen said the policy appears to have benefitted higher-decile school leavers without removing barriers to participation for others. And he hasn’t seen any evidence to suggest it’s helped plug gaps in the workforce.

The targeted training and apprentice fund, covering trades training fees from mid-2020 to the end of 2022, has done a better job of that, he added.

Given the expense of the fees-free policy, “you’d be wondering if you’re better focusing on targeted options”.

Initial reaction

Victoria University of Wellington Students’ Association president Marcail Parkinson said one of her biggest concerns was how the policy would be implemented.

“Final year” in the context of the new settings has been widely interpreted as “third year”, though the minister didn’t confirm this.

Parkinson said some apprenticeships and certificates only required two years of study. And she wondered what the new settings would mean for people studying part-time.

“My concern is it will be up to universities to do a lot of extra administrative work, when we’re already understaffed and under-resourced.”

Otago University Students’ Association president Keegan Wells described the proposed change as “a misuse of time and resources that could be spent much better elsewhere”.

“The fees being free in the first year is more than just a year selected at random, it is a symbolic stepping stone towards better costing education.

“The resources allocated to this project would be more valuable in other tertiary sectors such as reviewing the funding models of universities.”

New Zealand Principles’ Federation national president Leanne Otene said the organisation believed in a “fully-funded education system that’s equitable” while recognising the financial constraints.

“But if the aim is to address equity, year one is where we must start. Otherwise, you’re incentivising those who could already afford to study.”

She believes enrolments will fall further, especially among young people from rural and regional Aotearoa New Zealand.

“We’ll see those numbers not only drop but also their ability to get through that first year without hardship compromised.”



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