Tertiary education funding to be performance linked

Steven Joyce said 5 to 10 per cent of funding for tertiary education providers would be linked to student performance and drop-out rates. File photo / Sarah Ivey

Tertiary education providers will lose some funding if their students suffer high failure and drop out rates and students who fail won't keep getting student loans, new Tertiary Education Minister Steven Joyce says.

In his first speech in the role Mr Joyce told a business audience in Wellington this morning that he had three short-term goals - to tackle course completion rates; ensure qualifications were meaningful and ensure student support money was not wasted.

Mr Joyce said between 5 and 10 per cent of government funding for tertiary providers would be linked to student performance and dropout rates.

"The performance-linked funding model will provide financial incentives for institutions to continually work to improve the educational performance of their students," he said.

"Educational performance will be measured using indicators like successful course completion, qualification completion and student progression."

The Education Ministry, Tertiary Education Commission (TEC) and Mr Joyce were working on how to apply the new requirement.

The proportion of funding affected would be kept low at the start but could increase over time. He told journalists 90 to 95 per cent of funding would still be based on enrolments.

He also said students would not get automatic access to ongoing interest free loans. New Zealand put a higher proportion of its tertiary education funding into student support than other countries; 42 per cent of the $4 billion a year budget compared to 31 per cent in Australia and an OECD average of 19 per cent.

"A big reason is the way we handle our student loans. With the current policy settings, when you take into account interest write-off, bad debts and administration costs, taxpayers are currently writing off about 48 cents in every dollar that is advanced on a student loan."

The interest free loan was here to stay but "it can't be a blank cheque -- we need to check that we aren't setting up any perverse incentives that increases student and taxpayer exposure to debt, without getting a positive education outcome for individual students or for New Zealand".

He wanted to see continued access to student loans linked to academic progress.

New Zealand had 6000 qualifications on its books and Mr Joyce said he did not believe they were all necessary. In tourism there were 123 different certificate and diploma qualifications.

"The goal is to cut duplication, up the quality and reduce the number of new qualifications being added to the system unnecessarily."

There would be tougher pre-assessment of new qualifications through the New Zealand Qualifications framework.

Mr Joyce said that the sector's funding needed to be better used because there would not be more coming in the budget.

- NZPA