Universal Student Allowances Revisited (verdict: still bad)

Quite some time ago, I wrote a post rebutting the popular idea of a universal (tertiary) student allowance, suggesting a better alternative.  Since the NZ Labour Party has resurrected this terrible idea as their latest election bride (hopefully the NZ public are not stupid enough to fall for the same trick twice…), I figured I would revisit this.  If you don’t want to read all the way through, here’s the take-away point: please do not vote for Labour because you think a universal student allowance would be good for students or New Zealand in general.

Problems with a universal student allowance

The main problem is (still) that it blindly encourages anyone to become a tertiary student, without any consideration of whether they should be.  This is already a problem – somehow a misconception grew that everyone should go to university (or at least a polytech), which led to vast numbers of students unable to manage the academic work, which led to dumbing down of the courses taught.  There’s absolutely nothing wrong with not going to university/polytech – apprenticeships, internships, and other on-the-job style training is vastly superior in many cases.  Other problems include:

  • People who can easily afford to study without any assistance would be given assistance anyway. I can’t see how anyone would think that this would be a good idea.
  • A universal student allowance does little to address the problem with the loan scheme (the allowance is not high enough to remove the need for a loan, unless you have free accommodation).
  • A universal student allowance has no reward for success, either in earlier education, or in tertiary studies. Someone scraping through with C’s gets the same allowance as the straight A student.  I realise that rewarding success is not popular now, but that’s no excuse for making things worse.
  • A universal student allowance does not encourage students to attach value to their education. If students pay for education themselves, then they clearly see that it is valuable, and should not be wasted.  Anyone that has been through the system knows the truth of this problem.
  • The system hurts married couples where the spouse’s income is higher than the threshold, but not high enough to fully support tertiary education for the other partner.  Another example of the Labour government’s hatred for marriage and traditional family systems.
  • Any allowance system will have problems with abatement levels, which are already a problem in New Zealand. I have been in the ludicrous position where I had to ask for lower pay, which meant that I could keep my allowance, or I would have less money in the hand each week. Students are discouraged from working, which is not a good situation, and the system makes it difficult to supplement an allowance income (which is not enough to live off).

A Better Solution

While I firmly believe that a universal student allowance is not the right answer, I do not believe that the current system works well. It is increasingly clear that something needs to be done to fix the system – but it is not clear what that should be. Here is my proposed solution; I believe that not only is it more equitable than both the current system and a universal student allowance, but it is also more practical (which means more likely to gain support from both Labour and National, which is required in order to make a lasting change), and more likely to have a positive long-term effect on the New Zealand tertiary education system.

There are 3 parts to this solution:

  • Allowances. Simple, just get rid of them all. (I suppose you could almost call this a universal student allowance, just one where everyone gets $0.00 per week). This meshes quite well with the NZUSA calls for everyone to be treated equally.
  • Loans. Loans and scholarships (see below) form the backbone of the proposed new system, so need to be well designed, so there are several changes to the nice-idea-but-poorly-implemented existing system (outlined below).
  • Scholarships. My knowledge here is a little out-of-date, but I don’t believe that things have changed all that much since I was a Secondary School student. (See below)


  • Interest. There’s nothing wrong with getting people to pay for their education, but making money out of them is rather over the top.  However, having no interest at all is just giving the money away. Fix interest at inflation, and continue to write off interest while studying.
  • Accessibility. It’s a loan, not a grant, and you can’t get out of it (by declaring bankcruptcy, for example) except by dying, so there’s no reason to deny people one. Anyone (who is a New Zealand citizen / permanent resident) should be able to get a loan. This means, in particular, that the existing level of study requirements (just dropped to 25%) should be removed – so that someone doing a single paper can get a loan, which is not the case now.
  • Amount available. Maybe once upon a time the amounts were sufficient, but has anyone looked at how much it costs to rent a flat in Auckland these days? Or how much textbooks cost? Every institution should provide StudyLink with a list of approved costs for each paper. These can be claimed without any additional approval required (computers would do all the complicated work, of course). A small additional amount (say $500, inflation adjusted) would be available for miscellaneous expenses like computer equipment, paper, pens, travel, and so on. For any other expenses, (like conference travel for post-graduate students), the student would have to provide a letter, confirming that the cost is course-related, from their institution. The living costs portion of the loan should simply be bumped up, and be bi-annually inflation adjusted. Living costs should also be available year-round, if the student provides evidence that they are enrolled for study in the following year. Sure, all of this means more money given out, but it’s a loan, not free money! Even if people spend it frivolously, it’s their own money that they are wasting, and they’ll have to pay it back at some point.
  • Writing it off. The aim should be to write off a quarter to a third of the total loan amount incurred each year. This allows the government to do the targeting sort of work that it loves to do (and, in some cases, needs to do). For example, you could have $500 wiped off your loan for every year in which you spend at least 300 days in New Zealand. You could have $500 wiped off your loan for every year in which you work in rural New Zealand. You could have $10 wiped off your loan for every hour of work you do for a registered charity (although this would need extremely careful monitoring). You could have $500 wiped off your loan for each year that you serve on a Board of Trustees for a New Zealand school. The list is as long as the list of work that needs doing, but doesn’t have people to do it.
  • Paying it back. In the end, most students should still have to pay a portion of their loan back – as they reap the benefits from it. The repayment rate should be adjusted, however, so that the total payments to the government out of income aren’t too extreme (lower tax rates would also solve this problem). Since there’s only way way (death) to get out of paying it back, there really isn’t any hurry – for the student, or for the government (and the idea is that the education is serving them for life, after all).


  • Whatever the final assessment is at high school, this should have decent scholarships attached to it (The $400 or whatever that I got from an A bursary is not “decent”). For each subject in which a student receives a top grade they should get 1/6th of the average fees for a year’s study. A medium grade would be 1/12th, and other passing grades nothing; truly exceptional grades (back when I was a student a single Scholarship grade meant no money at all) would be 1/3rd. This would mean that a straight A (if ‘A’s existed any more) student would have more-or-less all their fees paid, a straight B student about half, and a student that gained scholarship marks would also have money to go towards living costs.
  • This money should be available for the full length of an undergraduate degree (say 3 years) – in my day you got 2 years, or, if your birthday just happened to be at the right time of year, 3 years.  (It’s possible this has been fixed since my day).
  • The amount of money shouldn’t stay tied to the grades you get in secondary school – it should automatically adjust to your tertiary grades. So a straight A student at high school that drops to straight B’s at uni/tech would only get ~ half their fees paid in year two, the straight B student that gets all A’s at uni/tech gets all their year two fees paid, and so on.
  • The idea here is that those people that are going to do well in their study (regardless of what subjects, their ethnicity, their gender, their socio-economic status, and so on) are helped more than those that perhaps should be considering another area (everyone is good at something, but not everyone is right for tertiary education).
  • This does make it easier for people straight from school than for “mature” students, but I don’t believe that that is a problem. For a start, that’s the way the current situation is. Secondly, we really want to encourage people to complete tertiary education while young (and then carry on with other, unsupported financially, learning later in life). If it really was an issue, then there could be special “mature” scholarship exams.

So what would this cost? When I calculated this several years ago, the total increase in spending was something like $415 million.  I’m sure it’s something similar now (since the loans are interest free already, the costs have probably reduced).  Certainly, compared to the foolish idea of a universal student allowance, it would be acceptable, and provides many other benefits.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: