Tertiary Education Advisory Commission Shaping the Funding Framework 14/17

Student Financial Support

The Commission is concerned that current arrangements for student financial
support do not ensure the most effective use of public funds. It makes several
recommendations about existing systems of student financial support, and
re-affirms the need for the government to provide adequate levels of support for
learners in an appropriate manner.

The Commission is concerned that the current Student Allowances Scheme may
not be the most effective method of improving equity for learners in the
tertiary education system, and recommends that the scheme be comprehensively
reviewed to ensure that funding is used in ways that actively advance equity and
participation. Such a review should take into account the effectiveness of
scholarships, mentoring, and bridging programmes as alternatives or complements
to allowances paid to students.

While scholarships raise complex issues, they can provide significant
assistance to learners and can also be used for steering the system in desired
directions. The Commission recommends that the government explores methods of
promoting private funding of scholarships, and that consideration be given to
the extension of current scholarship schemes to achieve excellence and equity
objectives.

Participation goals should continue to be supported through a Student Loan
Scheme with income-contingent repayments as at present. The Commission believes,
however, that the current policy of writing off interest on loans for fulltime
and low-income students while they are studying is not an effective use of the
government's resources. While this policy has decreased the length of time taken
to repay loans after graduation, it has also led to an increase in the number of
students taking out loans and in the overall level of student debt.

To compound matters, the policy has made it possible for learners to borrow
money and invest it for private gain (arbitrage). Consequently, the Commission
believes that this policy should be discontinued or that, as a minimum, the
incentives for arbitrage should be removed. Any savings accruing to the
government as a result of modifying the current loan scheme should be reinvested
in the tertiary education system and be used for the benefit of students. Where
a student enrols in a course or programme that does not pass the proposed
desirability test, or where a student is offered a non-subsidised place in a
capped course, student loans and allowances should not be available.