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 weekly earnings.

Date Updated: January 2017

Indicator Description

The ratio of average domestic tuition fees to the average weekly earnings for a full-time employed person.

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. However, participation in tertiary education remains unevenly distributed.  There is 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.  This includes 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 for older students, together with the student financial support arrangements mitigating direct costs, part-time study and students combining work and study.

This indicator looks at affordability by examining the costs of enrolling in tertiary education in relation to earnings, as well as the median amount borrowed by students and median loan balance on leaving study for people holding a student loan.

How We Are Going

In 2015, 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 $5,113.

This is 4.7 times the average weekly earnings for an employed person.  Relative to average earnings, 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 the university and polytechnic subsectors, while remaining relatively stable in wānanga. Overall, the 2015 ratio of average domestic fee to average weekly earnings remains well below that in 2000, when the average cost of domestic student fees was equal to 5.5 times the average weekly earnings for an employed person.  There was a large decrease in the fee to earnings ratio from 2000 to 2003.  The reduction was most pronounced at wānanga where it fell 86% between 2000 and 2003, with the most dramatic reduction occurring in 2001 through the introduction of free-fees policies for many courses in wānanga.  In addition, between 2001 and 2003 the Government introduced a fee stabilisation policy which allocated additional funding for providers that agreed to freeze their fees. Since 2004, fee increases have been restricted by Government regulation.

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.  Over 80% of full-time students and around 40% of part-time students used the loan scheme in 2015.  Income is also supplemented for those low-income students and their families who are eligible for student allowances. In 2015, the median amount borrowed by each student was $7,971 (excluding administration fees and interest charged on the loan), a 3.4% nominal increase from the amount for 2014 ($7,708). 

Between 2000 and 2005, the median amount borrowed remained relatively constant, but between 2005 and 2015 the median amount borrowed has increased by 45 percent. The median leaving balance has also increased in recent years. Between 2006 and 2014, the median leaving balance increased by 67% to reach $17,000 in 2014.

Figure 1: Average domestic fee as a ratio of average weekly earnings for a full-time employed person
Figure 1

Note:

  1. Source: Ministry of Education (2016); Statistics New Zealand (2016)
Figure 2: Median annual amount borrowed and median student loan leaving balance
Figure 2

Note:

  1. Source: Ministry of Education (2016); Ministry of Social Development (2016); Statistics New Zealand IDI and Ministry of Educaiton Student Loans Integrated Model.

References