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May 20, 2013 | by  | in News |
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Budget 2013

Debt reduction was the main line pushed by National in the Budget this year—and this was no different for student loan borrowers. Though the changes weren’t as drastic as last year’s increase of the compulsory loan repayment rates, borrowers who have moved overseas or are on their OE will have less money in their pockets to ‘find themselves’. Those who are attempting to escape their loans altogether may even be stopped at the border, as government departments step up their information sharing. Allowance eligibility was again cut, this time restricted for those over 40 and completely removed for those over 65. Treasury documents have a lot of numbers and can be quite confusing, but to help you make sense of it all, here is Salient’s Budget breakdown for 2013.

 

What It Means for Students

The defining message to students from the 2013 Budget is to stay in New Zealand, and don’t be old, with a number of changes to crack down on overseas borrowers and mature students.

Overseas borrowers will face fixed repayment obligations, stricter repayment thresholds, and sanctions for serious defaulters (including border arrest for the worst offenders). In addition, the Student Loan and Allowance stand-down period will be increased for permanent residents and Australian citizens, meaning they must have lived in New Zealand for three years before receiving an allowance or loan. The previous period was two years.

Further, information-sharing between government departments will see contact details from passport applications shared with the IRD
to track down loan defaulters. The changes are expected to save $106 million in total.

Older students will receive less Government support, with $30 million to be saved from the Student Allowance Scheme through cuts to the eligibility of older borrowers. Over-40s will only be able to claim the allowance for a maximum of three years, saving an expected $9.3 million over four years. Over the same time period, $7.9 million will be saved by making over-65s ineligible for a Student Allowance. The total cost of the Student Allowance Scheme is budgeted for $574 million in 2013.

It’s not all bad news, with Science and Engineering students likely to see slightly cheaper course fees after a two-per-cent increase in funding to those subjects. This is in line with a Government focus on subject areas expected to yield the highest economic benefits. In total, $27.2 million went to Science and Engineering ($17.3 and $9.3 million, respectively).

Overall, the Government budgeted an extra $52 million towards Student Loans, due to the average cost of each borrower’s loan growing. This increase in average loan cost can be attributed to the extra borrowing students are doing as a result of cuts to allowances under the National Government. The average cost per loan is expected to increase, although it is unclear by how much.

As a whole, fewer people are taking loans out each year. Loan numbers peaked in 2010 as a response to the recession, when more people entered study as the employment market soured.

A greater proportion of students now get loans than used to—79 per cent of students got a loan in 2008, and the proportion peaked at 88 per cent in 2011 before beginning to decline. It is now 83 per cent, and is expected to fall a further five per cent in the next four years.

The introduction of Voluntary Student Membership has saved the Government $8.8 million per year, and will continue do so each year. However, this cost is not ‘saved’ so much as moved somewhere else, as the costs of union membership have been absorbed into Student Services Levies in many cases, which most people pay through borrowing from the Student Loan Scheme anyway.

Finally, money for Government-funded scholarships increased by 10.5 per cent to $12.8 million, which older students are sure to be eyeing keenly.

 

What It Means for Institutions

Institutions in the tertiary-education sector fared better than students in this year’s Budget, with increases of funding to a number of key areas, and no major cuts.

The total spend on tertiary education was up 2.6 per cent from 2012, and is now $2.9 billion. $130 million dollars of new, re-prioritised
funding has been allocated to target a number of key focus areas within and across institutions. This excludes the Student Loan and Allowance Schemes, which come under Social Development spending.

The Performance-Based Research Fund (PBRF) has seen a 4.9-per-cent boost. The value of the fund is now $269 million, and Steven Joyce has indicated this will continue to rise over the coming years. Universities compete for a share of the $269 million from the PBRF based on the quality of their research, which is evaluated every six years.

As mentioned in the student section above, the Government has provided two per cent extra funding to Science and Engineering programmes. Universities with strong Science and Engineering faculties stand to gain from the expected increase in funding extra students will bring.

Part of universities’ funding comes under the Student Achievement Component (SAC), which is roughly based on the number of enrolments a University has, and goes towards direct teaching and learning costs. SAC funding received a very modest 0.9-per-cent increase to $2.04 billion, proportionally less than the 2.6-per-cent increase given to tertiary education as a whole. Once inflation is accounted for, this is a 0.1-per-cent increase. The low SAC allocation may mean students paying more for things like course fees, or some courses being cut.

The term ‘tertiary institutions’ here does not strictly mean only universities, as it also covers polytechnics, industry training providers, wananga, and other providers—it is these institutions which will see much of this new funding. Though it is true that the benefits of extra funding handed to tertiary institutions will be passed on to students, these benefits are targeted to certain groups.

Training for Māori and Pasifika tradespeople has seen an increase of $7.4 million, and trades training for the Canterbury region has also seen a sizeable increase to fill the needs of the Canterbury rebuild.

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