Students can now claim $12,000 but is it money well spent?

The policy shift on free fees for a year of university education is forecast to save the Government $879m by 2028. Photo / 123rf

By Susan Edmunds of RNZ

Eligible students can now apply for funds to help with the cost of their final year of study.

But one economist is asking whether it’s the best use of the money.

People who are studying for the first time can now access up to $12,000 for their final year of study or final two years of work-based learning.

The fees-free scheme changed from funding the first year to the final year from January 1 last year.

Payments are only available once the year is complete, so this year marks the first time students have become eligible under the new criteria.

Inland Revenue said the final-year fees-free programme was designed to motivate people to complete a qualification or programme.

They needed to pay their fees when they enrolled and then apply for the funding once they had completed and passed the qualification.

Infometrics chief executive Brad Olsen pointed to Government analysis of the scheme before the change was introduced, which highlighted it had not achieved many of its objectives.

“It wasn’t lifting participation rates or anything like that. It wasn’t helping people who would not have otherwise gone to university,” he said.

“It wasn’t helping people in a more disadvantaged position. It was basically just making stuff free, which might have felt good, but it didn’t make a real difference in terms of access or engagement or in completions or anything else. And so I think the challenge there was that you were paying a fair amount to subsidise a group of people to start their university career, where they were probably already going to do that.

“The Government did want to focus a bit more on the final year because if you’re not getting any of those wider benefits, if you’re not changing participation or anything else, then it doesn’t make as much sense to fund and pay for university studies that might not be completed. And if you’re funding the last year, you effectively know that you are getting that much higher completion rate.”

The regulatory impact statement that examined the change said the main impact of the policy change would be on cost savings for the Government. The total savings for the final-year fees-free policy versus first-year fees being free in the financial years 2023/2024-2027/2028 were estimated at Budget 2024 to be $879 million.

Cost savings would decrease over time to $139m on an ongoing basis.

Olsen said fees were not the barrier to university, a sentiment echoed by the regulatory impact statement.

“Especially because you take on a student loan and you have longer gains that you get over time with high earning potential.

“You have people that struggle still, be it fees free or not, to pay their living costs week to week. If they haven’t got the right educational attainment over time or they haven’t got the right supports in place, you can fund them to go to university as much as you want. But if they can’t find somewhere to live, if they can’t pay for themselves while they’re living there, if they don’t have the ability to continue to make it through the programme, none of that matters.”

He said there should be a wider conversation about how people could be encouraged and supported into education.

“Are you not better to instead of just saying everyone who’s eligible, who’s doing all these various degrees or courses or similar in their last year, they can get it free? Are we not better to make it more targeted if we know there are certain industries and areas where we want to cultivate a range of people, if we know that there are groups or communities that are struggling to get access?

“Are we not better to put the money in there rather than saying, you know what, anyone who’s doing a course, yes, if you’re completing it, you can have it free?”

Applications can be made through the myIR system. The application needs to be made within a year after completing an eligible qualification.

For people who have a student loan, the entitlement goes towards the loan balance.

– RNZ