By Eric Crampton 11/10/2016


Massey University’s Professor Giselle Byrnes, Assistant Vice-Chancellor (Research, Academic and Enterprise), writes on the public benefits of tertiary education in this past week’s NBR.

She makes a good case for the existence of public benefits; the main thrust of the piece is that the Productivity Commission’s report on tertiary pays insufficient heed to the public benefits while focusing on the private benefits and the appropriate share of those borne by students.

Leaving aside for now that the Prod Comm report was rather broader reaching than that, the casual reader of Professor Byrnes’s would likely be surprised to find out that the government is already covering about 82% of the cost of tertiary education, once you factor in the subsidy provided through the zero percent loans scheme. Mightn’t it make sense to point out the private benefits if making the case for bringing the private and public cost shares into closer alignment with private and public benefits?

I wrote in the foreword to our recent report on the student loans scheme:

In systems where student loan repayments are made through the tax system and are conditional on earning enough to make those payments, interest charges are no barrier to participation in tertiary education. The real barrier to more equitable access to tertiary education comes earlier, in primary and secondary schools, where too many students do not receive the training they need to succeed in post-secondary schooling.

In this respect, our report echoes the findings of the 1994 Ministerial Consultative Group report, “Funding Growth in Tertiary Education and Training”. That report presented two options for change in the tertiary sector. Under Option A, students would bear a greater part of the burden of financing higher education, with their share rising from 20% to 25% of the cost of providing tertiary education. Option B went farther, recommending shifts in funding from tertiary tuition subsidies towards targeted improvements in primary and secondary school. Students’ share of the burden of tertiary study, under Option B, would have reached 50% by 2000 – for those students earning higher incomes after graduation.3

In reality, students’ share of the direct costs of tertiary education fell to 16% by 2010, due largely to the subsidy provided through interest-free loans.4 Where the main barrier to accessing tertiary study, whether at university or polytech, happens before a student completes NCEA, improving access requires earlier intervention. Funding can and should shift accordingly.

Charging market interest rates on student loans and devoting some of the hundreds of millions in annual savings to enhancing lower decile students’ preparation for university, and to needs-based student assistance, would do much more good for students who really need the help.

3 Ministerial Consultative Group, “Funding Growth in Tertiary Education and Training”, (Wellington: Ministry of Education, 12 May 1994),18-21.
4 Rachel Baxter, “Sharing the Private and Public Costs of Tertiary Education”, Policy Quarterly 8:2 (May 2012), 49. See also the New Zealand Productivity Commission “New Models of Tertiary Education” (Wellington: New Zealand Productivity Commission, February 2016), 57, which puts the ratio at 18% private to 82% public.