Students' allowance and loan support are not enough to cover rent, food, and other necessities.
By Susan Edmunds of RNZ
International student Huda Jamali says studying in Palmerston North is a bit cheaper than in other parts of the country – but she was still surprised by how pricey it could be.
She says a non-catered spot in the university halls is about $230 a week. “I don’t recommend living in halls. I don’t think it’s worth the price for the halls I’ve seen here in Palmerston North.”
She is paying $270 for a room in a house while she finishes her animal science studies. “I think it’s worth it because it’s bigger and more comfortable.”
She said she had been particularly surprised by the cost of food. “Our groceries are very expensive as well. Fresh produce is crazy. It’s very expensive and it’s so hard to eat healthy just because of the expensive fresh produce.”
Darcy Nelson found studying in Dunedin very expensive too. She said rent was “ridiculously expensive”, “especially considering what you’re getting for it. Rent in my second year was $205 and then rent in my third year was $220. It’s really crazy for what you’re paying for – it’s a room in a very, very cold, mouldy house”.
Nelson said she looked for work for a long time but was not able to get any. “It’s really difficult to get a job down there.”
She ended up borrowing more on her student loan to pay for living costs. “My parents were helping with rent in my second year because $300 [in student loan support] for rent, food, power ... you can’t do that. One of my best friends who was in my house both years didn’t have any help from her parents, she got the full loan out and she was skimping by truly eating pasta just all the time. She couldn’t afford anything, it was crazy.
Nelson said she had a falling-out with flatmates over the power bill because it was so hard to save money. “You just can’t because the house isn’t properly insulated, you’ve got broken windows, you’ve got a dryer going ... I think the biggest power bill between seven girls got to $900.”
Rent went up every year, she said.
“Especially on Castle St in Dunedin. The rent goes up by $15 a year, or $20. I know the girls who moved into our house this year are paying $250 or $260 a week each compared to our $220.”
She has moved back to Auckland to be able to live with her parents and work while she studies.
“I did two years there and two years is enough. I’ve got a couple of papers to complete and I’ll do it from Auckland, save my cash, save my money.”
Simplicity chief economist Shamubeel Eaqub said the cost of being a student had increased significantly.
“In 2005, the average student could just about make it work. A weekly student allowance of $160 against essential costs of $140 left a slim $20 buffer. Not comfortable, but survivable. Rent was $86, food $42, electricity $11. You could manage, especially if you had a part-time job too.
“Fast-forward to 2025 and that buffer has flipped into a deficit. Student support has risen 86% but the cost of essentials has increased more – by 220%. Rent is now $193. Food $96. The $20 surplus is now an $8 weekly shortfall, before you’ve bought a textbook, caught a bus or bought a beer. You need over $300 a week just to live.”
Ministry of Social Development data show that in the first quarter of last year, just under 35,000 students received some form of financial assistance under the student allowance scheme.
That was up 5.2% on the year before. On average, they received $1882 in payments in the quarter, which was down 3%.
The maximum after tax for a student under 24 living with parents was $277.72 a week. For those away from home, it was $323.33.
How much people can get from the allowance depends on their own income and that of their partner, if they are over 24, and their parents’ income if they are under 24.
Someone under 24 whose parents’ joint earnings are more than $69,935.32 a year before tax will have the amount they can receive in the allowance reduced.
There is no student allowance available for them if their parents’ income is over $127,701.81 and they live at home, or $137,187.86 if they do not.
Students who do not qualify for an allowance can borrow more money for living costs on top of their student loans – but this has to be paid back.
They can borrow up to $323.43 a week, an amount that is adjusted with inflation each year.
Eaqub said Dunedin and Palmerston North rents were 60% of Auckland prices in 2015 but that had risen to now more than 80%.
University tuition fees were up 113% and polytech fees up 60%.
“To pay for tuition and living costs – I hope not for other things – the median student loan balance has increased from $10,000 in 2005 to $24,000 in 2023.”
He said it was also less clear that students were getting a payoff for their studies.
“Post-GFC [Global Financial Crisis], between 2009-2014, graduate incomes held up even as more people entered tertiary education,” Eaqub said. Pre-Covid, income premiums started flattening, and post-pandemic, returns have become dispersed and uncertain, he said, with 25- to 34-year-olds “facing declining returns and stiffer competition than the cohorts before them”.
“A qualification still helps. But the field you study and the sector you enter now matter far more than whether you have a piece of paper at all.”
Earlier, RNZ reported data from Education Counts showed higher-level qualifications had traditionally brought earning benefits over a person’s working life.
It said wages would generally increase as people gained work experience, but higher levels of education seemed to mean that people’s income grew at a faster rate. Getting a degree gave more of a wage benefit to European workers than it did for other groups.
Eaqub said for those with a Level 4-6 tertiary qualification, “they’ve been around 10% more”.
“Adults with no qualifications, on average, have received around 20% less in weekly income and 12% less in hourly earnings when compared to those with school qualifications only.”
For employed adults, the hourly earnings of those with a degree have been around 35% more than for those with school qualifications only.
But Eaqub said people were being asked to take on significant debt and live in weekly deficit with the increasingly uncertain hope that their income would pay off on the other side.
“Some will make it work. Many will be squeezed in ways that shape their financial lives for decades. Delaying home ownership, limiting savings, starting careers already behind, or getting ahead because of parental support.”
Indexing student support to living costs would help, Eaqub said, as would redirecting KiwiSaver subsidies to young people at birth to help them build up an account to help with education costs.
The housing problem also needed to be addressed, he said, and the student loan scheme reimagined.
“Income-contingent repayment already exists, which is good. But with balances now averaging $24,000 and incomes more volatile, could there be a case for repayment smoothing, such as repayment holidays, when income drops, or maybe bonded or time-limited debt forgiveness for fields with demonstrable public benefit – teaching, nursing, social work – where forgiveness is earned only after verified service?”
Eaqub said young people now were being asked to take on debt, work a lot or rely on their parents. “We want our young people to have access to affordable and high-quality education. They are the future of our country.”
– RNZ