I have always been in favour of student loans – they have given students, particularly those from low socio-economic backgrounds, the opportunity to undertake tertiary study. For many this would not have been possible in decades gone by. What many people don’t realise is that the government subsidises student fees to the tune of around 70% leaving students to foot the remaining 30%. To fund this portion students can apply for a student loan, and most take this up. ACT has always campaigned on the ratio of government/personal fees paying being around the right level, given that there is a public good as well as a personal good involved in the equation.

Since I entered Parliament in 2002 there have been several contentious decisions made by politicians that affect how student loans operate and repayment of loans occur. The worst, in my view, was the 2005 election bribe by the then Labour government allowing those who stay in New Zealand interest free terms. This created an unfairness – young people who want to start up a business in New Zealand for example will not be given an interest-free loan to do so, even though it could be argued that they are also providing a public as well as personal good.

On the hustings it is very obvious that student loans bother parents of students much more than students themselves. For most (my children included) this is an issue for another day and one that those taking valued educational courses factor into future income calculations. For too many however, encouraged by families and society at large, low quality courses offer little in the way of future opportunity and leave the student with little ability to repay the loan. Worse, the drop-out rate of all courses is high, leaving the student with no qualification but a loan like a millstone around their necks.

This weekend’s front page headline Failing students to get the boot comes as no surprise. Universities are claiming they will have to turn thousands of students away due to underperformance because they are underfunded by government. My question is “How fair is it that tertiary providers have for some time taken students on and allowed them to stay on despite many not achieving pass grades?”
Universities, like schools, should be striving for excellence. If students are failing it could be for a number of reasons, all of which should be addressed. Teaching may not be up to scratch or students not capable of achieving the necessary grades. Whatever the reason, it would seem obvious that these instutitions have an ethical obligation to assess students' ability and provide quality education. If they are not meeting this ethical obligation why should the taxpayer foot the bill?

The issue that instigated this outburst by the New Zealand Vice-Chancellors’ committee was the release on 16 December 2009 of the Tertiary Education Strategy 2010-15. This outlines the government's priorities and expectations for the next five years and makes it clear that there is no extra money to go around. Additionally it states that funding will be linked to performance. Each University is currently funded by the government (the taxpayer in actual fact) for a specific number of students. They can take more students but will not be funded for these.

In the Priorities section of the Strategy it states :
In a tight fiscal environment, the Government is unable to provide significant funding increases to meet the growing demand for tertiary education. We will need to move funding away from low-quality qualifications (such as those with low completion rates or poor educational or labour market outcomes) to fund growth in high-quality qualifications that benefit New Zealanders and contribute to economic growth.

Providers will need to manage costs, continue to seek efficiency gains, ensure the qualifications they offer best meet student and employer needs, and explore additional sources of revenue. A key driver to improve the efficiency of public investment in tertiary education is to improve course and qualification completion rates.

Quite why linking performance to funding is portrayed as wrong is beyond me. We do our young people no favours by lumbering them with a student loan they have little or no ability to pay back, we set them up to fail. I would go a step further and suggest tertiary providers and government have a duty to act responsibly and that this is exactly what the strategy suggests.