Affordability of tertiary education

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.

Date Updated: June 2011

Indicator Description

The ratio of the average domestic student fee to the average weekly income of employed person.

Why This Is Important

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 is unclear.

How We Are Going

In 2009, 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 $3,917.

This is 4 times the average weekly income for an employed person. Relative to average income, the tuition costs of attending university were highest, and the tuition costs of attending wānanga were lowest.

Since 2003, the average affordability of tertiary education worsened slightly in all sectors, with Wananga least affected by the change in affordability. The 2009 ratio of average domestic fee to average weekly income remains well below that in 2000 when the average cost of domestic student fees was equal to 5.7 times the average weekly income for an employed person, 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.

Figure 1: Ratio of average domestic fee at tertiary institutions to average weekly income for employed persons, by sub-sector (1997 to 2009)

Source: Ministry of Education (2009); Statistics New Zealand (2009)

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 enable eligible students to borrow the full amount of their fees.  Four out of five eligible full-time students and two out of five eligible part-time students used the loan scheme in 2009. Income is also supplemented for those low-income students and their families who are eligible for student allowances.

Figure 2: Average amount borrowed annually and average student loan balance held by Inland Revenue under the student loan scheme (1993 to 2009)

Source: Ministry of Social Development (2010); Inland Revenue (2010).

In 2009, the average amount borrowed by each student was $6,991 (excludes administration fees and interest charged on the loan), a 0.5% increase from the amount for 2008 ($6,953). 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 (compound annual growth rate). 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 1.6% per annum.

The average student loan balance was $16,731 in 2009, an increase of 3% from 2008 and almost 3 times higher than the average balance in 1993.