Salient

Government considers cost of a universal student allowance

By Seonah Choi | 21 Jul, 2008

In a move that may signal an upcoming election promise of a universal student allowance, the government revealed last week that it had considered the cost of implementing such a scheme, with the resulting bill found to be about $728 million.

The policy, if introduced, would allow nearly 50,000 full-time students currently ineligible for an allowance to receive taxpayer funded support.

Tertiary Education Minister Pete Hodgson said that he had instructed officials from the Ministry of Education to look into the costs of the scheme, but added that the subsequent paper produced by officials was prepared only in order “to get a better understanding of what the real costs of a universal student allowance would be.”

The paper found that removing parental income testing on the student allowance to enable all full-time students to receive it would cost a total of $2.09 billion over four years. Once existing costs of the scheme were removed, along with an anticipated drop in borrowing under the current student loan, the net extra cost of the plan would come to $728 million.

Students have long campaigned for the introduction of a universal allowance, the most recent protest held during the recent New Zealand Union of Student Associations’ conference in Auckland.

At present, only 57 per cent of students receive the allowance. Rates vary from $122 a week for those under 25 and living at home, to $153 a week for those living away from home, and $184 for those aged 25. The allowance is means-tested on personal income, and for students under 25, on their parents’ income.

The government is also known to have considered increasing the allowance to up to $350 a week, but this possibility has been dismissed as being too expensive. However, Education Forum policy advisor Norman LaRocque said the entire scheme would come at too high a cost to New Zealand.

According to LaRoque, $728 million would make up more than a third of what the government currently spends on tuition subsidies paid to universities.

“Government spending on tertiary education relative to Gross Domestic Product, a measure of the country’s ability to pay, is already above the OECD average,” LaRoque pointed out.

“Putting money into student support, rather than into funding for tertiary education institutions, would do nothing to improve the performance of the tertiary education sector in New Zealand.”