Tertiary talk

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Zero fees - an economic winner or loser?

Tertiary Talk - March 2018

Tertiary institutions around the country were cast into a state of flux last year when Labour announced their zero fee tertiary education policy with less than 100 days before the enrolment of the first cohort of ‘free fees’ students.

Admissions departments were flying blind on the ‘how’ bit.

What systems changes would be required? How would the funding be delivered? What additional resource would be available to deal with the increased administrative burden? What evidence was required for eligibility?

Increases in student demand were also contemplated, with some predicting a surge in 2018 new enrolments as much as 15% against Treasury’s more modest 2.5%.  

Although still too early to gauge the overall impact on 2018 enrolments, the free fees policy will ultimately change the landscape of tertiary education.

The policy is expected to:

  • Increase equality, like preschool, primary and secondary school, tertiary education will ultimately (by 2024) become free for three years, encouraging those who may have been locked out of tertiary study for financial reasons to seek further study;
  • Increase tertiary enrolments resulting in a greater qualified workforce whilst also improving the bottom line for tertiary institutions;
  • Provide positive societal benefits due to a higher educated and more productive workforce;
  • Reduce the burden of future taxpayers from student debt making them more capable of contributing to growth in the economy.

While that all sounds eminently sensible, the problems we see are:

  • Increased costs which are ultimately borne by the taxpayer.  Unfortunately there is no such thing as “free”.  Whilst no increase in taxes has been announced, tax cuts offered under the National government are being reinvested in funding tertiary education (amongst other things) meaning the taxpayer is ultimately footing the bill.  Inequity therefore remains as lower income earners, with no intention of pursuing tertiary education, fund greater costs of tertiary education for no personal benefit;
  • The policy could stretch existing tertiary institutes resources and possibly dilute the overall quality of tertiary education;
  • Result in fewer qualified tradespersons to meet our skills shortages.  Although the zero fee policy extends to students in apprenticeships, industry training or studying at polytechnic it could lead to more students pursuing a university degree, which typically generates higher  individual returns;
  • Lead to the government placing restrictions or caps on the number of places available, although such a strategy is counter to the intent of the policy of improving access for all;
  • Reduce the value that students place on tertiary education, resulting in time wasters and potentially lower levels of commitment and achievement.

As the policy is still in its infancy, the implications are yet to be widely felt.  The jury is therefore out as to whether zero fees will be an economic winner or loser.

If you would like to discuss this further you can contact Penny Thomson at pethomson@deloitte.co.nz

Zero fees
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