MR JOYCE … Currently we’re writing off about 45c in the dollar for every student loan because of the interest-free policy. That’s down from about 48c. We want to get it down to 43c-odd in this Budget and then I’d love to see it down below 40c. Two ways you can do that: one is get a much better repayment rate from international borrowers; second way is actually looking at some of the high-cost borrowers in New Zealand, and there are some. I’ll give you one example which might be dear to your heart. We are currently loaning $30 million a year to people training to be pilots. $30 million a year. Most of them don’t go on to get jobs as pilots, either in the commercial or general aviation sphere. The write-off for pilot training in terms of write-off of student loans is in excess of 60%. So we’re looking pretty closely at whether we’re doing that right.

PAUL What, are you saying possibly no more student loans for pilot training?

MR JOYCE Well, not necessarily no more student loans for pilot training, but we could be looking at things like saying, for example, “We won’t fund your PPL or your Private Pilot’s Licence,” or, “We won’t fund your solo-instructor hours.” Those sort of things are options.

PAUL What about older people – people over 55 getting student loans for going to…?

MR JOYCE That is another one where there’s a big write-off. I mean, once you get past 55 – if you take out a student loan at 55, 56 – then there’s every likelihood that about 70% of that will be written off, because you’re at the other end of your working career, so we are looking at some things around that. I think we always want to be able to provide some access, so for perhaps borrowing for fees, but borrowing for living costs and borrowing for the compulsory course costs is not necessarily where we want to be.

What I love about this is that Joyce is laying out a very clear rationale for why he is proposing to cut the loan access. He may be right or wrong, but by giving out some facts he has enabled other to engage with him. Unfortunately the Greens and Labour have mainly rolled out the assertion that all over-55s are career changers anxious to improve themselves, but the fact that they’re not paying back their loans rather undercuts that. Labour and the Greens will need to lift their game and PROVE that is the case in order to undercut Joyce’s proposal. It is unlikely they will, as Joyce is probably completely right on his (admittedly limited) choice of measurement, but he has given them the ability to engage.

The aviation industry, is another area where a clear outlier is being targeted. The average annual loan is $50,000 ($30m for 600 EFTS) and repayment rates aren’t good. The aviation industry will have been in Joyce’s hair this week about it, but they’re well aware of the issues. If you want to see the detail about pilot training poor completions and other issues, read this report. Aviation hasn’t been delivering results for the investment in it and it’s good to see hard questions being asked. (On the other hand, it’s good to see Air NZ streamlining their training pathways and there are ways to make things better.)

So, this week’s thumbs-up goes to policy based on data as it allows us to have a serious discussion about where best to put our resources. And, in this case, whether we should shift resources from a current, to a better, use, just as Steven Joyce has been doing this year and last year for student loans.

Thumbs-Up celebrates good ideas or outcomes in the tertiary education sector each week.

Even before the events of 22 February 2011, Finance Minister Bill English was signalling that it would be a tough budget this year.  The Minister of Finance must always choose his or her words precisely and on 4 April Mr English said “the Government [has] to carefully consider its spending priorities and set a credible path back to budget surplus. Only then can we begin repaying our debt and building a buffer against the next economic shock.”  In other words, the 2011 Budget will be as far away from an election-year lolly scramble as it fiscally possible.

While this position is both understandable and reasonable, the problem with being in cost-cutting mode is that it often precludes Governments from taking bold or visionary steps to drive change.  Bold steps don’t necessarily have to cost more.  We should not confuse being fiscally careful with being overly cautious with regard to policy.

These days, a number of Budget announcements are “foreshadowed” or simply announced by Ministers well before Budget Day proper.  The Budget went to print on 7 April and, before these pre-announcements begin, Independent Tertiary Institutions (ITI) decided to carry on our nascent annual tradition of making some predictions about what we expect to see in the Budget, and some policies we would love to see but don’t expect will happen this year.  These will generally be limited to issues which relate to the Private Training Establishment (PTE) sector.

Looking back at our predictions for Budget 2010, we got a credible 6 out of ten correct (though one was not announced in the Budget but happened later), 1 partially correct and 3 wrong (including one where we actually were pleased to be wrong).  So, that hit ratio means we are not quite Paul the Octopus but we are usually pretty close to the mark.

So, here is what we expect to see:

• A modest but welcome increase in Government SAC funding for the PTE sector of between $3m and $8m – probably $5m – to cover inflation and maybe a little more.
• Expansion of the Youth Guarantee scheme utilising the five vocational pathways announced by the Minister recently.  Given the limited policy work done so far, there may only be some indicative or contingency funding attached – possibly around $10m for the first year.
• Confirmation that PTEs will be able to offer level 1 and level 2 courses to ensure they can fully participate in the expanded Youth Guarantee scheme.  This has been well-signalled and will be well received.
• Some level of restriction on the ability of older students to access allowances and/or loans.  This could be one of the more controversial aspects of the tertiary education Budget.  PTEs have a slightly higher level of older students than TEIs.
• Additional support for providers affected by the Christchurch earthquake.  Over 120 PTEs were impacted with more than 20 still shut entirely.
• A small funding boost for the new Education NZ Crown Entity – possibly $3m-$5m.  This would be a combination of reassigned funding from efficiency savings created by the merger and some additional student levy money.
• A fix for the GST issue with travel payments for a number of trainees.  Currently, providers are being short-changed and the Government has said the problem will be addressed.

What we would like to see but don’t expect to:

• A workable solution to the 103% over-delivery policy.   This policy disproportionately affects PTEs because of the historical nature of their EFTS caps.  There is a review of the policy currently underway but progress has been slow over the last three years.
• Greater flexibility to allow Government funding to follow performance between tertiary sub-sectors.  Currently, each has a discrete silo of money.  We think the Government is moving this way however.
• A performance funding system which actually rewards the best providers.  Under the currently proposed scheme, the top providers will only receive the original funding promised to them.  There is no real incentive to excel.  This ‘carrot’ might be added after the scheme has operated for a year or two.

I guess we will only find out for certain on 19 May 2011.

ITI is a recognised peak body representing a diverse range of high-quality private providers around New Zealand.

“The disappointment though is that the government has decided to fund 180 less full time student places at UCOL each year, compared to what they funded for 2010. They didn’t want to fund low level computing programmes or papers with student completion rates under 30%. This amounts to a $600,000 net annual reduction for UCOL.”

1. University Calendar Not the stuffy academic kind, but the female rugby players at the Old Boys University club in Wellington have launched a nude calendar – the first link takes you to photos, but here’s some audio on Radio Live.
2. University Bands The University of Auckland is seeking bands involving staff or students to open the 95bfm Summer Series concert.
3. Kingsland Allegations Key people at Kingsland Institute were in court last week to defend themselves against charges brought by Immigration New Zealand. The allegations are that fees were claimed to be paid, but were not, and personal funds were briefly loaned to a student in order to get a visa.
4. Fur Seals and Penguins I’m grumpy at the people who killed the fur seals, but at least an Otago Uni academic has added some information here and here and here (same basic comments in all). Meanwhile dead penguins have washed up on Northland beaches and have, of course, been sent to Massey for analysis (looks like weather, not people, is the cause).
5. Social Media Value An Open Poly academic has researched the use of social media in spreading and accessing information in emergencies and has some interesting findings (I know my posts on the Chch quake took readership to record levels on several consecutive days). On that note, a Lincoln academic is happy with repairs to quake-damaged farmland.
6. TEC Link to Cabinet Sir Wira Gardiner (TEC Chair) was already pretty well connected but now his wife, Hekia Parata, is in Cabinet!
7. Top Flautist Virtuoso flute player and Distinguished Alumna, Marya Martin, will visit The University of Auckland to offer master classes and lead a recital concert.
8. Massey Summer School Last week it was reported that Massey’s summer school enrolments were almost halved after they closed off enrolments early due to their enrolment cap.
9. New iPhone Game Two University of Canterbury academics(and one ex-UC staffer) have developed an iPhone puzzle game.
10. Peak Oil Otago and Canterbury academics have written a report on peak oil vulnerability for Dunedin City Council (ODT story).
11. Health Training Steven Joyce will  launch an international education programme today under which Massey will train Asian public health specialists and veterinarians.
12. New Professors Otago Uni appointed 11 new professors and 22 new associate professors last week – here’s the media release and ODT story for academic-spotters. I see blogger (and law academic) Andrew Geddis was made a professor.
13. UCOL Leaves NZUSA A couple of weeks back I meant to mention that UCOL’s students’ assn had pulled out of NZUSA. It seems to be about VSM, levies and representation.
14. Short Bits Massey academic’s book on potatoes. Kiwiblog picked up on the University of Auckland’s recent celebration of philanthropy. AUT’s media conference had some news coming out of it here, here and here. Five Otago Poly grads will show at iD Dunedin Fashion Week next year. Victoria has a literary translation conference coming up. Under the sea research involves Otago and Victoria scientists.
15. Media Mentions Nuclear veterans’ health problems (Massey).

I wondered what you thought of the logic used in the WITT discussion — in particular the suggestion that they should avoid ” finding an underperforming student programme and dumping it, or getting more international students” and instead ask the TEC to find an extra $300,000. In the current environment that probably means something like 40 or 50 kids being told they can’t get into university this coming year. Does that make keeping an underperforming course seem OK?

I think there are interesting moral and management questions in this situation. As a starting point, the WITT Council and management are understandably seeking to maximise the resources available to them to deliver education, while the TEC will make the final decision about whether to put funds into WITT or some other TEO, such as a university.

In terms of WITT’s decision-making, they do need to pursue all angles to balance the books. But I don’t think there’s a clear decision to be made here of dropping a poorly performing programme or just taking on a few more international students. WITT has been micromanaged by people for years and I’m sure they don’t have any programmes with 10% completion rates or no relevance to their region. Rather, I’d expect that any programme they target will simply be the lowest performer they have, rather than a programme that fails on some global quality scale (although such a global scale might exist next week when performance data is released). Similarly with international students, their numbers will be limited by their marketing resources and market position, rather than just turning the tap on or off. I think the options discussed by them are the things that you would do when you are running a deficit, rather than necessarily being the next obvious management decision. I’m not sure they face an imperative to make those cuts until they don’t have the funds to offer them – although more transparency in allocation of resources would be a good thing.

In terms of the TEC’s decision-making, I’m sure they will face pressure to increase university EFTS, but they have set funding by subsector according to some internal determination and they will probably operate within those bounds. Whether they should shift funds to universities is another matter and one about which I’m not convinced. Universities generate a lot of press, but I’d want to see what the marginal return was for different student groups before increasing any subsector’s funding.

What do you think about the challenges in this situation for WITT and TEC?