Budget 2010: Move to free up course-fee increases rattles student unions

Tertiary Education Minister Steven Joyce. Photo / Sarah Ivey

The Government has ditched the "fees maxima" policy which caps tertiary education fees at a set monetary level and will instead allow institutions to raise all course fees by up to 4 per cent from next year.

The change, made in yesterday's Budget, has prompted concern from student unions that it will result in significant increases to expensive courses, such as medicine and dentistry, and drive graduates overseas to pay back their loans.

Tertiary Education Minister Steven Joyce said it was a sufficient cap to stop fees spiralling out of reach while also allowing universities to charge more for courses that were expensive to offer. The percentage increase could change from year to year if needed.

He said the fee maxima policy had acted as a disincentive to offering expensive courses because institutions could not recoup their costs.

It had also meant those studying cheaper courses were effectively subsidising those doing the expensive ones.

David Do, co-president of the NZ Union of Students Associations, said medical and dentistry students already paid about $10,000 for their courses and racked up loans of $65,000.

He said overall the Budget was a double blow for students, who faced higher fees as well as stricter criteria for student loans and allowances.

The Budget will make it harder for students whose parents have income other than from wages to qualify for an allowance from next April, when income from trusts and other investments will be included in assessing eligibility for the allowance.

The Government also expects significant savings from tightening the rules for the student loan scheme, including cutting it off for failing students and imposing a $40 annual fee on all those with a student loan.

Under the changes, permanent residents and Australians must also wait two years before they can get a student loan - expected to save $75 million in loans that will no longer be drawn, as well as $22 million a year for the next five years in unpaid debts.

Cutting loans off for students who repeatedly fail also has significant savings of up to $40 million a year after 2012. Another change will limit students to a maximum of seven years of loans for undergraduate study.

Overall the Budget brought mixed results for the tertiary sector, in which many were expecting funding cuts.

Mr Joyce said he had chosen to channel money from areas he considered to be low-priority into funding 1735 more places at universities and 3173 at polytechnics and technology institutes next year.

The Budget got some praise from the sector, although there was concern it would not be enough in a climate where jobs were still scarce.

Dr James Buwalda, chairman of NZ Institutes of Technology and Polytechnics, said it was pleasing to see the commitment to the sector shown in increased student numbers. But the trade-off had been capacity funding, which helped polytechnics adapt to meet the needs of their communities.