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Tertiary Education Policy in New Zealand

Prepared by Maureen McLaughlin, February 2003

with funding from the sponsors of the Ian Axford (New Zealand) Fellowships in Public Policy

About the author

Maureen McLaughlin is Director of International Affairs for the Office of the Secretary at the US Department of Education. Before returning to the Department in 2011, Maureen was Lead Education Specialist and Education Sector Manager for Europe and Central Asia with the World Bank. She had previously been Deputy and Acting Assistant Secretary for Policy, Planning, and Innovation in the US Department of Education’s Office of Postsecondary Education, and an analyst at the US Congressional Budget Office advising on issues in postsecondary education, employment and training, public service employment, and welfare reform. Maureen was awarded the rank of Distinguished Executive in the Senior Executive Service by President Clinton for exceptional performance in government leadership, is a frequent speaker on postsecondary education issues and initiatives, and is active in local affairs.

During Maureen’s Ian Axford Fellowship exchange to New Zealand she was based at the Ministry of Education in Wellington, where she researched New Zealand’s tertiary education reforms since the mid-1980s.

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Executive Summary

As a part of New Zealand’s overall response to changing economic conditions in the 1980s, there was a significant change in the landscape of tertiary education. As was the case in many policy areas, New Zealand adopted more competitive, market-based policies for tertiary education.

Participation in Tertiary Education Increased Significantly as a Result of Competitive Market-Based Policies in the Late 1980s and 1990s

Due to increased private contributions coupled with a demand-driven system of public subsidies to institutions, the competitive policies of the late 1980s and 1990s resulted in significantly higher participation in tertiary education. New Zealand moved from more or less free tertiary education and relatively universal student allowances to a situation where fees are charged to students, student allowances are highly targeted by income and student loans are widely used. Government policy moved from subsidising a smaller number of students at a higher rate-often referred to as an elite system-to subsidising a larger number of students at a lower amount per student-often referred to as a mass system of tertiary education.

Move to More Central Steering Tied to National Needs

The Labour Government, elected in 1999, was concerned about some of the effects of the competitive model-in particular, that costs were too high for students and that the system had too little coordination. The Labour Party campaigned on the need to move away from a competitive marketplace environment in tertiary education to a more strategic, coordinated direction tied to national needs. After the election the Labour government quickly reduced costs for all students regardless of their need through interest-free loans while studying and through fee stabilisation. The competitive market-based model continued, however, while the Tertiary Education Advisory Commission (TEAC) advised on how to move toward central steering. TEAC issued its fourth and final report in early 2002.

The government’s policy decisions following the TEAC reports maintain many of the competitive aspects of the current system but do so within a more centrally steered and regulated approach. The government has published a Tertiary Education Strategy for 2002-2007 to guide the system; is in the process of creating a new Tertiary Education Commission to fund and regulate tertiary providers; has adopted new regulatory and funding policies; and is developing the specifics of these new policies. Many of these changes were recommended by TEAC although not in the exact form.

As many policy and implementation decisions on the new regulatory and funding approaches are still being made, it is too early to determine the impact of the tertiary strategy and the move to more central steering. The strategy’s goals are so broad that almost anything could be done. This presents a real opportunity for New Zealand but also a real challenge. Performance goals, programme design, and implementation will be key.

What the system steers towards, how policies are designed and implemented, the extent to which funding and regulatory policies complement and reinforce each other, and the independence of the Tertiary Education Commission in carrying out its functions will determine the ultimate effects of the new directions.
Decisions to be made in the second half of 2002 and the beginning of 2003 will be key in determining the future shape and performance of tertiary education in New Zealand.
More detail in how policies and implementation will proceed is being developed and is very much needed.

Do Big Increases in Participation Mean New Zealand Has Solved Tertiary Access?

While overall participation in tertiary education has increased substantially since the mid-1980s, significant disparities exist for ethnic groups and for students from low-decile schools. Maori and Pacific Nations students are under-represented in tertiary education as are students from low- and middle-decile schools, especially at the higher levels of tertiary education. Most Maori and Pacific Nations students attend low- or middle-income schools. These opportunity gaps mean the goal of broadening access has not been solved in New Zealand.

Recent policy decisions, such as eliminating the accumulation of interest while studying, have spread government assistance to all participants rather than focusing on where it would make the most difference-on those most in need or most at risk.

Current tertiary policy discussions also tend to focus on costs and debt for all students, and on system direction and processes to change the system steering, but not enough on issues of opportunity. Press coverage presents a rather alarmist view of student costs and debt levels without a balanced view of the overall situation. Political discussions tend to reinforce the more alarmist view. As a result many in the public have a misleading picture of tertiary access and affordability in New Zealand.

Three Main Challenges to Moving Ahead on Tertiary Access and Opportunity

To address these issues of tertiary access and opportunity, New Zealand faces three main challenges in moving ahead:

Develop better acceptance of public/private cost sharing in tertiary education.
Close the opportunity gap in tertiary participation for at-risk groups.
Use data and research to inform decisions-to make and deliver good policy and to improve decision-making.

Challenge: Develop better acceptance of public/private cost sharing in tertiary education

Many New Zealanders still feel that free tertiary education would provide the most access. However, evidence in New Zealand and in other countries runs counter to this as tertiary participation has increased in New Zealand and many other countries at the same time that costs increased for students and families. In the recent New Zealand election two minor parties adopted platforms for free tertiary education. As a result many in the public still hold out the hope that fees will be eliminated.

It is difficult to design policies to move ahead on particular issues-such as closing the opportunity gap-when the overall public/private cost sharing approach is still being debated. A better understanding and acceptance of this situation, which is relatively new in New Zealand, is needed.

Maintaining the policy of student fees and public/private sharing of costs should be continued to ensure adequate resources. It should be coupled, however, with targeted early intervention and financial assistance for students most at risk. A strategy to help students and families “Think Tertiary Early” would also help students and families to plan earlier so that tertiary is a real option academically and financially when the time comes.

There is also a widespread misperception of the student debt issue. Many feel that debt is overburdening most students and leading to a lifetime repayment burden. A better understanding of the debt issue is important so that individuals can make well-informed decisions on borrowing and so that they are not deterred from tertiary by misperceptions of the costs and borrowing. Understanding that the country’s income-contingent loans provide insurance against low earnings and that most borrowers repay in a reasonable time period would be helpful as many people seem to feel that income contingent loans present a lifetime of debt. A number of other changes could be instituted in the student loan programme to ensure that adequate access to loans to pay for tertiary education is balanced against excessive borrowing.

Challenge: Close the opportunity gap in tertiary education

Significant disparities exist for ethnic groups-especially Maori and Pacific Nations-and for students from low-decile schools, especially at the higher levels of tertiary education. These differences in tertiary participation are highly correlated with their previous academic preparation. Maori and Pacific Nations students and students from low-decile schools are much more likely than their counterparts to leave secondary school without a qualification or with one below the university level.

Raising expectations and academic preparation as well as addressing student financing and information is needed to reduce the opportunity gap. A coordinated and targeted strategy across educational levels and policy instruments could make a big difference. Key points of this strategy include:

Making “improving opportunity” a key part of implementation of the tertiary strategy;
Creating early intervention school/tertiary partnerships for lower-decile schools;
Providing more and earlier information to students and families;
Improving student financing, including targeted grants or rebates on fees for at- risk students; and
Paying institutions more for enrolling targeted groups of students.

Challenge: Use data and research to inform decisions

Tertiary policy in New Zealand is made too often on ideology, rhetoric and anecdote. More and better data, analysis, programme evaluation, and research are needed to inform the design and implementation of policy. Without this attention to data and studies using data, public funds are likely to be used ineffectively. Consumers-students and families-also need better information and they need it earlier.

The Ministry should develop, with an expert advisory group, a research agenda for tertiary education to examine issues of access and equity, including the effects of fees, loans, student expectations and academic preparation. While this paper uses US research to complement New Zealand’s analysis and data, it would be particularly helpful to have more in-depth research on New Zealand’s experiences to reflect the country’s unique situation. Longitudinal data on a cohort of students starting when they are in secondary school through tertiary completion and into the labour market are needed to address many transition issues across levels of education.

A number of promising data initiatives are under consideration or are under development in the Ministry of Education and other organisations related to tertiary access and opportunity. With careful attention and development these data sources and studies using them could improve tertiary decisions on policy and programme delivery.

Conclusion

As a small country with all the education policy levers at the same level of government, New Zealand could become an international leader in addressing student access and opportunity. Coordinated and targeted strategies across educational levels and across policy instruments could make a big difference in improving tertiary access in New Zealand and in reducing persistent opportunity gaps.