Fees-free failures

Labour's first-year fees-free policy for tertiary education failed in its aim to improve participation from poorer parts of society.

The Coalition Government now plans to switch free fees from the first to the third (final) year. This is supposed to improve course completion rates. It, too, will be an expensive flop in its stated goal.

There are some benefits to both approaches. But whether these are enough to justify hundreds of millions of dollars each year is debatable.

The details are being worked through for the new policy. It is supposed to be ready by the Budget in May.

This will be complicated. What is meant by the "third" year? The present first-year free-fees scheme covers two years for workplace-based trade training. What would the "final year" represent? University courses can be four years, and joint degrees and post-graduate study are common. Students might well receive a free year and then go back to paying. As frequently occurs, the complexities will be more than initially predicted.

It has already been stated that "double-dipping" will be prevented. No students having received the first-year free fees will be eligible for another year’s worth.

When the first-year fees free was introduced in 2018, the plan was to extend it to two more years’ study. The cost would soon have headed towards $1 billion.

Labour backed off the extensions when it quickly became clear the programme was not increasing participation. Covid costs provided a good public reason for the backdown. Labour also changed the primary aim. It became to reduce the debt burden on students. Of course, free fees did that.

It could be argued the true colours of the policy became more obvious as an election bribe for students and their families before the 2017 election.

More damning evidence came from a New Zealand Herald report last December. The number of decile 1 students in first-year tertiary study has halved since the controversial fees-free policy started. Students from wealthier backgrounds have made up an increasingly greater share.

Motivations for going to university are much broader than just the cost of the first-year fees. In any event, interest-free student loans provide access to money, even if the capital must be paid off later.

Similarly, the third-year fees free will make little difference to course completion rates. Those with the motivation to continue will do so anyway. Those who drop out might well be gone before the third year rolls around.

National slammed the first-year free fees but then backed off abolishing them in its policy. New Zealand First, however, promoted the idea of third year free for those who had passed all their papers. Act New Zealand thought free fees should be gone entirely.

New Zealand First’s policy gave National a compromise way out and a means to save money. Free fees cost $347.1 million to the end of June last year, $40m below budget because of fewer than expected students. Because one in four subsequently drop out, the policy change will save about $90m a year.

Free fees for all years would be "nice to have", tempered a little by the incentives when students have "skin in the game".

Given the demands on public money, full free fees are unrealistic, despite tertiary education, in some ways, being a public good.

Perhaps money should be diverted towards modifications to tertiary funding models. As the official briefing to the incoming ministers in November noted: "the university sector faces unprecedented financial challenges".

Course fees, already largely subsidised for domestic students, are only part of the cost of university study.

The cost for a year in the Otago’s colleges is heading towards $20,000 all up. Undergraduate fees range from $6250 (commerce and teaching) upwards.

While the means-tested student allowance (up to $341.01 a week before tax) can go towards expenses for some students, no doubt the overall costs are an insurmountable barrier for some.

It is a shame universities spend so much of their scholarship funds competing for premier students rather than more going towards the needy.