Fees-free tertiary education: right problem, wrong answer?

Sticking to their 100-day plan, the new government has removed fees for first-year tertiary students. The fees-free policy has generated a lot of excitement. But how well will this policy perform? This article examines the fees-free policy and outlines how the policy misses the mark in increasing access to tertiary education.

Free tertiary education rolling out to new students

From 1 January 2018, the first year of tertiary education will be free for most new tertiary students. Additionally, student allowances and living costs will increase by $50 per week. Minister of Education Chris Hipkins claims 80,000 people will be eligible for free study as of next year. You can check if you are eligible here .

The fees-free policy is available for people who will be attending a government recognised tertiary education organisation (TEO). It includes universities, institutes of technology and polytechnics (ITPs), Wānanga, private training establishments (PTEs), and industry training organisations (ITOs)1 .

The government intends to increase funding to cover the first two years of study in 2021, and extend this again to three years by 2024.

Affordability is at the heart of the fees-free policy

The government is committed to improving both the affordability and access of the tertiary education sector. Increased education levels carry many positive externalities (benefits beyond the individual). The fees-free policy intends to target not only those who would have otherwise attended tertiary education but also those who wouldn’t have, because of the cost. These individuals include both school leavers and people who are yet to access tertiary education.

Student fees were introduced in 1989 to reflect the benefit that individuals receive from tertiary education, such as higher salaries. The fees-free policy is a departure from this logic of individual benefit, with an effort to make tertiary education more accessible to all. Consequently, the policy aims to lift the skill-base of New Zealand’s working-age population. It is hoped that this will improve employment levels, output and productivity.

Although affordability is the heart of the policy issue, the policy itself is not. The fees-free policy has been budgeted for $2,846 million over the next five years. However, due to the rushed nature of the policy announcement, a final costing has not been given. Treasury commented “It is unusual for Cabinet to be asked to approve a proposal with this level of expenditure without having the final appropriations before them.” Treasury’s comment highlights the hasty and uncertain nature of the policy. This leaves many questions on the true cost of the policy to the taxpayer.

Living costs remain a more persistent barrier to access

For students, course fees are not a present concern but instead a future obligation. Currently, the government subsidises over 80% of course fees. The remainder is paid by the student. This small portion can be covered by zero-interest student loans for those that wish. These loans are not required to be paid until the end of the student’s study, and only after the graduate earns an income above the threshold level. In essence, course fees are not the problem when determining the affordability of tertiary education – the costs of living are.

There are other, more immediate, costs associated with tertiary education: accommodation expenses and the large opportunity cost of missed work and wages . Removing course fees does not change these costs the student feels while studying.

Most students who previously could not afford tertiary education, are still likely to be unable to meet the costs associated with study (such as rent and food) with fees-free tertiary education. Fortunately, the increase of student allowances and living costs is a step in the right direction for this problem, though not the end-game solution.

Fees-free may create a larger mismatch of skills

For the education sector to be successful, it should provide graduates with skills that will allow them to access a range of employment opportunities. Industry experts believe the fees-free policy may push individuals from ITOs to university . In effect, this push drives students away from qualifications that are needed in the workforce (for example, electricians) towards qualifications without a need for more workers (for example, homeopathy ). There is as equal a need for ITO and other graduates, as those from university, with greater job opportunities expected in non-university qualifications in the future. Consequently, this policy may result in an increased mismatch of skilled labour in many fields – exacerbating the problem of New Zealand’s skills shortages instead of fixing it.

The fees-free policy eliminates one of the tertiary education system’s key levers for targeting in-demand skills – price. By making courses free, this signalling is removed.

Will this policy improve access?

The new fees-free policy aims to make tertiary education more accessible. By removing the cost pressure of course fees, it is expected that those previously unable to afford tertiary education will be now able to attend. Those eligible for funding extends to both school leavers, and those who have not accessed tertiary education before.

The fees-free policy is, in a very broad sense, similar to the 20 Hours early childhood education (ECE) policy introduced in 2007. In attempts to improve access to ECE, particularly for Māori and Pasifika, the government provided 20 hours free ECE access every week. Although 20 Hours ECE was successful in increasing overall ECE participation, it was unable to effectively equalize the level of access for the priority groups of Māori and Pasifika families.

Although at the other end of the education spectrum, the fees-free tertiary policy has similar goals to 20 Hours ECE. The fees-free policy has budgeted for a 3% increase in student numbers. However, it is questionable as to whether it will be the disadvantaged individuals that receive increased access to the tertiary education sector. Often, problems of accessibility begin before students progress to tertiary education.

Ideally, all students should be prepared and able to access tertiary education. Further investment in secondary education is required before expecting tertiary education to truly be accessible to all.

Fees-free falls short of the stated goal

Despite noble intentions, the fees-free policy misses the mark. Unfortunately, due to the large and uncertain budget of the policy, this is a rather expensive mistake to make.

The fees-free policy attempts to improve both the affordability and access to the tertiary education sector. Those who wish to undertake tertiary study should not be hindered by their socio-economic background. Yet in focusing only on broad-based fees funding, the new government’s policy fails to address these concerns of disadvantage. Though the policy does begin to address affordability of tertiary study, more is needed to allow all New Zealanders greater access to tertiary education. At the same time, New Zealand needs to become better at addressing the supply of skilled workers in sectors under pressure.

Further understanding and addressing mismatched skills and costs of living would be an ambitious, yet logical, place to examine next.

1 Industry Trainees are covered for two years of fees-free study from 1 January 2018.

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