Tertiary and international education initiatives

Details of the main tertiary and international education initiatives announced in Budget 2011.

Tertiary education initiatives

InitiativeDescription
Additional Equivalent Full-Time Students - Private Training Establishments

Operating funding
  • 2011/12 $5.423m
  • 2012/13 $10.093m
  • 2013/14 $9.692m
  • 2014/15 $9.352m
Four-year Total $34.560m

Capital funding
  • 2011/12 $2.708m
  • 2012/13 $3.759m
  • 2013/14 $3.737m
  • 2014/15 $3.741m
Four-year total $13.945m

Funding also appropriated to Votes Social Development and Revenue.
This initiative funds approximately 750 additional places (equivalent full-time students or EFTS) at private training establishments (PTEs) from 2012 onwards.

The additional places will be allocated to high-performing PTEs. These places will allow growth in the PTE sector.
Expanding the Youth Guarantee

Operating funding (reprioritised from Youth Training)
  • 2011/12 $28.110m
  • 2012/13 $56.220m
  • 2013/14 $56.220m
  • 2014/15 $56.220m
Four-year total $196.770m
In 2010, the Government established 2,000 fees-free Youth Guarantee tertiary places and this increased to 2,500 in 2011.

To further raise the number of places under the Youth Guarantee, existing Youth Training and Youth Guarantee places are being combined. This will result in up to 7,500 Youth Guarantee places being made available from 2012.
Skills for Canterbury

Operating funding
  • 2011/12 $42.000m
  • 2012/13 -
  • 2013/14 -
  • 2014/15 -
Four-year total $42.000m

Capital funding
  • 2011/12 $6.000m
  • 2012/13 -
  • 2013/14 -
  • 2014/15 -
Four-year total $6.000m
Funding is being set aside for up to 1,500 additional training places as part of a comprehensive cross-agency response to meet additional demand for labour for the reconstruction programme called Skills for Canterbury.

$42m (operating) and $6m (capital) is available for additional funded places at polytechnics, private providers and ITOs if required.

The Skills for Canterbury package also includes up to 3,000 more construction-related training places in Polytechnics in Canterbury and around the country (from existing funding).
Funding for Refugees’ English for Speakers of Other Languages (ESOL) Programmes

Operating funding
  • 2011/12 $2.500m
  • 2012/13 $5.000m
  • 2013/14 $5.000m
  • 2014/15 $5.000m
Four-year total $17.500m
This initiative creates an additional 700 places on intensive ESOL programmes for refugees and migrants with low levels of English, which will be free to participants.

It also provides funding to allow approximately 400 refugees to study towards an ESOL qualification in mainstream tertiary education without paying fees.
Targeted Tuition Subsidy Increases - Degrees and Postgraduate Study

Operating funding
  • 2011/12 $13.410m
  • 2012/13 $26.820m
  • 2013/14 $26.820m
  • 2014/15 $26.820m
Four-year total $93.870m
This initiative increases the subsidy for degree and postgraduate study by 2 per cent from 2012.

A targeted increase supports the Government’s objective of greater student achievement at higher levels of the tertiary education system in a way that is aligned with the need for fiscal restraint at Budget 2011.
Equalising the Top-up Funding Rate for Postgraduate Courses across Subsectors

Operating funding
  • 2011/12 $1.630m
  • 2012/13 $3.260m
  • 2013/14 $3.260m
  • 2014/15 $3.260m
Four-year total $11.410m
Universities currently receive higher funding rates for postgraduate study than other subsectors.

This initiative equalises funding rates for postgraduate tertiary courses at polytechnics and wānanga with the university funding rate from 2012. Private Training Establishments will also have their funding rate for post-graduate courses increased from 2012.

Private Training Establishments will continue to be funded at a rate that is 9.5 per cent lower than universities, polytechnics and wānanga, in line with the funding rates for study at other levels.
Additional Medical Student Places

Operating funding
  • 2011/12 $0.723m
  • 2012/13 $2.147m
  • 2013/14 $3.650m
  • 2014/15 $5.230m
Four-year total $11.750m

Funding also appropriated to Votes Social Development and Revenue.
This initiative adds a further 40 places to the first year undergraduate medical cap, increasing the number of places available to 485 places from 1 January 2012.

The additional funding for 40 extra medical places builds on the increases of 60 places in 2010 and 20 places in 2011, and continues the Government’s manifesto commitment to increasing the medical cap by 200 places over 5 years.

This initiative is funded from the Vote Health Budget 2011 allocation. The total cost of the initiative is $14.1m (operating) and $4.1m (capital) over four years.

International education initiatives

InitiativeDescription
International Education Promotions

Operating funding
  • 2011/12 $10.000m
  • 2012/13 $10.000m
  • 2013/14 $10.000m
  • 2014/15 $10.000m
Four-year total $40.000m
This initiative increases funding by $10 million a year to raise the profile of New Zealand education overseas, to aid the recruitment of international students, and the consolidation of bilateral education relationships with key trading and education partner countries and regions.

It increases the total Government funding for international education promotions from $3.450 million to $13.450 million each year.

Tertiary education savings

InitiativeDescription
Reduced Industry Training Fund from 2013

Savings Rationale:
The Government is getting greater value out of the tertiary education system by shifting expenditure with lower value and/or reducing demand into high-demand, higher-value areas.

The reduction in the Industry Training Fund from 2013 is unlikely to result in reductions of trainees that are actively undertaking substantive qualifications.  This is because the reduction in funding is due to a combination of reduced demand and some performance issues in the industry training sector.

Four-year total savings – $57.700m
The Government is reducing the size of the industry training fund from 2013 because the current level of funding is not required to meet demand for high-quality industry training. 
Industry Training Fund - Removal of Regulatory Compliance Training from 2012

Savings Rationale:
Training that is solely to comply with health and safety standards and other regulations is the responsibility of employers, not the Government.

Four-year total savings – $32.900m
From 2012, Industry Training funding will no longer be available for short duration health and safety and regulatory compliance programmes that are the normal responsibility of the employer in providing a safe workplace.

The Government stopped funding short health and safety and regulatory compliance programmes at tertiary providers such as polytechnics from the beginning of 2011.  This principle is now being extended to industry training.
Improving the Value for Money of the Government’s Investment in Pilot Training

Savings Rationale:
The Government is concerned about the value of its current investment in aviation training. Pilots leave study with large student loans and tend to take a long time to repay them.

Four-year total savings –
  • $27.858m (operating)
  • $16.107m (capital)
Savings from:
  • Vote Social Development
  • Vote Revenue
From 2012, tertiary education providers delivering pilot training programmes funded by the Tertiary Education Commission will be able to charge students a maximum fee of $39,273 (GST excl.) per EFTS (equivalent full-time student).

In addition, students will not be able to borrow through the student loan scheme for the solo flight hour requirements for Private Pilots and Commercial Pilots Licences.

Students enrolled in pilot training programmes in 2011 will not be affected by this change.
Savings from the Education (Freedom of Association) Bill 2009

Savings Rationale:
Once the Education (Freedom of Association) Amendment Bill is passed, students will no longer be able to borrow for students’ association membership fees through the compulsory fees component of the Student Loan Scheme.

Four-year total savings –
  • $28.909m (operating)
  • $33.998m (capital)
Savings from:
  • Vote Social Development
  • Vote Revenue
The Education (Freedom of Association) Amendment Bill is currently being considered by Parliament. This member’s Bill upholds students’ rights to freedom of association, by ensuring that no student is compelled to join a students’ association. The Bill will amend the Education Act 1989 by removing any requirement for a student to join a students’ association.

There will be consequential savings for the Student Loan Scheme when the Education (Freedom of Association) Amendment Bill is passed. Students will no longer be able to borrow for students’ association membership fees through the compulsory fees component of the Student Loan Scheme.
Reprioritised Tertiary Education Commission Policy Advice Expenditure

Savings Rationale:
The clarification of responsibility for tertiary education policy advice will increase efficiency through reduced transaction costs and duplication.

Four-year total savings – $2.000m
The Government decided in 2010 that the Ministry of Education would be the Government's principal advisor on tertiary education policy. Previously both the Tertiary Education Commission and the Ministry of Education advised the Government on tertiary education policy.

The clarification of responsibility for tertiary education policy advice will increase efficiency through reduced transaction costs and duplication. This efficiency gain means that additional funding is available for frontline services.

Budget 2011 student support initiatives

Details of the student support initiatives announced in Budget 2011.

Tertiary Education
InitiativeDescription
Restricting student loan eligibility for borrowers aged 55 and over to tuition fees only

Rationale

The cost to the Crown per student is significantly higher for older borrowers than for other groups, since older borrowers are likely to repay under the income-contingent loan scheme at a slower rate than and for a shorter time than other borrowers.

While the average income of borrowers aged 55 and over is consistently below the median for all borrowers, these borrowers tend to have a high net wealth with which to support themselves through tertiary study. 

Savings

Four-year total
  • Operating - $38.051m
  • Capital - $8.315m
From 1 January 2013, people aged 55 and over will not be eligible to borrow for living and course-related costs from the Student Loan Scheme.

All current students over the age limit at the date of announcement, or who will reach the age limit before the date of implementation, are eligible to borrow after the 1 January 2013 implementation to complete the qualification in which they are enrolled on announcement (but only that qualification and not any related follow-on qualifications), or until 1 January 2015, whichever comes first.
Removing course-related cost entitlements for part-time full-year students

Rationale

This policy supports the Government’s objective of improving the return of the country’s investment in supporting students through their education.  The policy:
  • will align student loan entitlements for part-time full-year students with those for part-time part-year students
  • recognises that part-time full-year students have more of an opportunity than full-time students to meet the costs of their course-related materials by working
  • will reduce student loan borrowing and generate savings for the Crown.
Savings

Four-year total
  • Operating - $23.755m
  • Capital - $27.108m
This policy removes the entitlement for part-time full-year students to borrow for course-related costs. Part-time full-year students will be entitled to borrow for compulsory fees only. This will align student loan entitlements for part-time full-year students with those for part-time part-year students.

Part-time full-year is defined for student loans purposes as being study for a minimum of 32 weeks in one year and with a course load of less than 0.8 Equivalent Full-Time Student (EFTS).
Holding repayment threshold to $19,084 until 2015

Rationale

The decision to suspend inflation adjustments to the repayment threshold until 31 March 2015 takes into account the current economic climate and the significant cost of the Student Loan Scheme asset to the Crown.

The cost to Government of new lending (the amount the Government never expects to receive back over the life of the loan) has increased from 11 cents in the dollar in the 1990s, to 45 cents in the dollar currently. 

Savings

Five-year total
  • Operating - $162.373m
  • Capital - $63.326m
This measure will suspend inflation adjustments to the student loan repayment threshold until 31 March 2015. The repayment threshold was set at $19,084 from 1 April 2009 and will remain at that level until 31 March 2015.
Adding back losses to income for student loan repayment purposes

Rationale

The policy rationale for excluding these losses from the definition of income is that while losses may reduce an individual’s income level, such losses result from business decisions. The Government does not believe it should provide subsidies for personal decisions through social assistance.

This proposal and further review of rules relating to income will make the definition of income for student loan repayment purposes more consistent with Working for Families and the Community Services Card income definition.

Savings

Four-year total
  • Operating - $2.940m
  • Capital - $23.000m
The current definition of income for student loan repayment purposes is changing. From 1 April 2012, New Zealand-based borrowers will no longer be able to use losses to reduce their repayment obligation in respect of their student loan.

Currently, business and investment losses are calculated into the definition of income for student loan repayment purposes. This means that borrowers who experience personal losses may not meet the current student loan repayment threshold and therefore, not have a repayment obligation.

Allowing losses to be offset when calculating income for student loan repayment purposes is effectively subsidising business and investment decisions for student loan borrowers. This is not considered appropriate.
Restricting student loan eligibility for those with an overdue student loan repayment obligation

Rationale

In 2009, around 4,800 borrowers took out a new student loan while in default of $500 or more on a previous loan. About 80% of these borrowers have had student loan applications denied by StudyLink until they meet their obligations.

The new policy will ensure student loan lending is good value by reducing lending to those who do not meet their obligations.

Savings

Four-year total
  • Operating - $10.109m
  • Capital - $10.110m
From 7 February 2013, borrowers who have overdue payments amounting to $500 or more and have been in default for one or more years will not be eligible to access the Student Loan Scheme.

This proposal relates to borrowers who are in default from February 2012 and affects new lending from 7 February 2013.

Borrowers who successfully apply for hardship to the Inland Revenue will not be affected by this policy.
Requiring a contact person for all new loan applications

Rationale

While borrowers are required to keep their contact details up to date, often these become out of date after they complete study. This can be a particular issue if the borrower goes overseas.

Operating funding
  • 2011/12 - $0.284
  • 2012/13 - $0.071
Four-year total $0.355
Beginning 1 January 2013, borrowers of the Student Loan Scheme will be required to provide details of a contact person. Having an alternative New Zealand contact person gives another way for Inland Revenue to locate borrowers who have lost touch to help them manage their loan.

We expect an increase in repayments and a reduction in defaults as a result of this policy.
Extending the exemption to the two-year stand-down for new permanent residents to sponsored family members of “protected persons”

Rationale

Currently an exemption to the two-year stand-down for permanent residents and Australian citizens is given to refugees, families of refugees and protected persons, but excludes family members who are sponsored by protected persons.

Operating funding
  • 2011/12 - $0.062
Four Year Total - $0.062
The exemption will be extended to the sponsored family members of protected persons for both student loans and allowances.

When a student applies for a student loan or allowance for study starting on or after 1 January 2012 and provides evidence that they were granted permanent residency via sponsorship by a family member holding protected persons status, they will be exempt from the two-year stand-down. 
One-year application-based repayment holiday

Rationale

The current three-year holiday is generous and may result in some borrowers becoming used to not making any payments on their student loan.

This policy change aligns with changes to the Student Loan Scheme in Budget 2011 which will increase personal responsibility for student loan debt by encouraging repayments. This proposal will signal the importance of student loan obligations.
Since 2007, borrowers have received an automatic three-year holiday from any repayment obligation when they leave New Zealand.  This holiday period is being reduced to one year.

Borrowers will also now be required to apply to Inland Revenue for the repayment holiday and provide or confirm contact details for an alternative New Zealand contact. Borrowers who do not do so will not receive a repayment holiday.

For further information on tertiary education initiatives in Budget 2011, visit the Tertiary Education Commission’s website (external link) .

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