Tertiary Education Minister Steven Joyce wants to fund extra tuition places, as reported by the NZ Herald, but tinkering with student loans won’t generate the cash he needs. The story is presented as using student loan savings to fund tuition places but, as I was quoted in the story, I don’t see how the proposed changes to student loans will increase places. Instead, I think it’s part of a bigger game.

Students receiving allowances must pass half of their courses to get an allowance the following year, but there are no such requirements for student loan recipients, and Steven Joyce is thinking about aligning them. Alignment is a good idea, since interest-free loans are pretty much equivalent to an allowance – MOE figures show that in the June 2009 year new lending of $1,360 million was made, but $532 million (39%) was written off immediately. Further, the MOE estimates that it could receive only 53.3% of the face value of student loans if it sold them on the open market. So, if 47% of student loan funds are really just given away to students, we should think about using the same rules as when 100% of the funds are given away (allowances).

There are good arguments to cut access to student loans when people don’t perform academically, because it’s an intuitively good indication that they won’t perform well next year. That said, I’d like to see some data on this from the TEC or MOE, so we could track the likelihood of people having a bad year and then going on to be successful or whether people who had a bad year and left were successful after, say, two years in the workforce. Those sorts of numbers are important, because the debate will very quickly become complicated as everyone pleads for special treatment – student groups, providers with poor completion rates, community groups, etc. If we can quickly get some good numbers on the table, then a more sensible discussion might ensue about when people are cut off and when they can re-enter. For example, if poor academic performance in one year was a very good predictor of future poor academic performance, the best response might be better academic preparation well before tertiary enrolment, rather than debating when someone gets kicked out.

The policy discussion might roll on for a few months before being settled in the Budget, but this is all tinkering at the edges and will not fund any extra places – if one student is not enrolled due to poor prior performance, the new student will trigger the same tuition subsidy and be just as likely to borrow. I’m sure Steven Joyce is well aware of that  and that he’s mainly just sending signals that prioritisation of funding will occur. So, his take-home message probably isn’t that student loan changes will create major change, but that changes in funding priorities across the board will create better value from tertiary education and possibly fund a few more places.

Other comments have been made by blogs Homepaddock and Kiwiblog.