Affordability of tertiary education
The average fees for tertiary education have increased slightly in recent years when compared with changes in average weekly income, but are still well below those of the 2000 year.
Date Updated: March 2008
Indicator Description
Estimated average domestic student fees as a percentage of average family income.
What We Have Found
The average fees for tertiary education have increased slightly in recent years when compared with changes in average weekly income, but are still well below those of the 2000 year.
Why This Is Important
Affordability is one element of opportunity to learn at tertiary education level, and tertiary education is increasingly the gateway to a higher standard of living and central to national wellbeing. This is being recognised by increased participation in tertiary education. However, opportunities for tertiary education remain unevenly distributed. There is undoubtedly a range of reasons for this, including prior achievement at school and the impact of family resources through the school years.
The direct cost of tertiary education to learners is one factor that can affect participation decisions and is an important feature of all tertiary education systems. Because of concerns about access, affordability and the need for lifelong learning, the Government makes direct financial assistance available to many tertiary students. These include repayable, subsidised loans for tuition fees, course costs and living expenses and, for low-income students, non-repayable grants for living expenses (student allowances). Affordability is a complex matter and is not adequately captured by tuition fee levels, particularly with the increase of older students, part-time study and students combining work and study, together with the student financial support arrangements mitigating direct costs. This indicator looks at affordability by examining the costs of enrolling in tertiary education in relation to family income, as well as the average amount borrowed by students and average loan balance for people holding a student loan.
Recent studies confirm that participation in tertiary education depends on a combination of achievement at school, ability, and family resources (including income). The extent to which personal and family financial resources play a role in determining opportunity for tertiary education, following the end of schooling and in addition to other factors such as academic preparedness and socio-cultural determinants of choice, is unclear. It is also difficult to measure because there is no reliable measure of the personal or family income of school and tertiary students, although a reasonable approximation for compulsory age children could be developed.
How We Are Going
In 2006, the estimated average cost of domestic student fees for tertiary students at public institutions (on an equivalent full time basis for one year of study) was $3,224. This represents 4.0% of average family income over a year. Relative to average income, the tuition costs of attending university were highest, and the tuition costs of attending wānanga were lowest.
| Average domestic fee at public tertiary institutions as a percentage of average weekly income, by sub-sector (1997-2006) |
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Since 2003, the average cost of fees as a proportion of average family income increased slightly in all sectors. However, this ratio remains well below that in 2000 when the average cost of domestic student fees equated to 5.7% of the average annual family income, after increasing across all sectors from 1997 to 2000. The reduction was most pronounced at wānanga where it fell 88% between 2000 and 2003, with the most dramatic reduction occurring in 2001 through the introduction of free-fees policies for many courses in wānanga. These movements reflected a simultaneous decrease in the average cost of fees and increase in family incomes.
Changes in the average cost of student fees are not simply a reflection of the level of fees being charged, but may also reflect changes in demand for more or less expensive course options. Most notably, the highest growth in the number of domestic equivalent full-time student (EFTS) numbers since 1997 occurred for wānanga, while growth in EFTS numbers was lowest at universities.
These results must be interpreted in light of the fact that in New Zealand, highly subsidised Government student loans are available to almost 70% of tertiary students for deferred payment of tuition fees. The vast majority of these students are able to borrow the full amount of their fees. Income is also supplemented for those low-income students and their families who are eligible for student allowances.
In 2006, the average amount borrowed by each student was $6,610 (excludes administration fee and interest charged on the loan), a 3.2% increase from the amount for 2005 ($6,408). Up to 2003, the average amount borrowed by each student had increased each year since 1993, except for 1999 when the average amount decreased due to changes in government policies. This policy, introduced to restrict the uses to which finance from the scheme could be employed, was revoked in the following year.
The most rapid growth in average amounts borrowed occurred from 1993 to 1998, with a 7.5% average annual increase per annum. Since 2000, however, with Government policies encouraging fee stabilisation in tertiary institution through increased funding rates, the average amount borrowed per student has risen by only 1.5% per annum.
| Average amount borrowed annually and average student loan balance held by Inland Revenue under the student loan scheme (1993-2006) |
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The average student loan balance was $16,833 in 2006, an increase of 6.0% from 2005 and 3 times higher than the average balance in 1993. Although the growth in student loan balances has been less pronounced since 2000, the average loan balance has increased at 3.5 times that of the average amount borrowed per student over the same time period.
Where To Find Out More
Information from this indicator should be read alongside the following indicators in order to consider the possible impact of changes in affordability and about the benefits and returns to investment in tertiary education for individuals:
- School leavers with a university entrance standard
- Participation rates in tertiary education
- Impact of education on income
References
Ministry of Education (2007). New Zealand's Tertiary Education Sector Profile & Trends 2006. Wellington: Ministry of Education.
Ministry of Education (2006). Tertiary Education Strategy 2002/07: Monitoring Report 2005. Wellington: Ministry of Education.