Education of individuals is the key to the economic growth of nations, and therefore is also a good which has externalities, due to the distribution of its benefits. The result of this is that consideration needs to be given as to how education should be funded, so as to enable any person to have access to education, at a cost which is deemed desirable. In New Zealand, while public schools for primary and secondary education are fully funded by the government, tertiary education is at cost to the student. The aid which is distributed to these students comes in the form of student allowances, student loans and subsidised institutions. The desirable allocation of funding to each of these is a topic of debate. Within the Tertiary Education Strategy the New Zealand government has identified the groups which it wants focus on, with regard to enrolling and completing tertiary education, as school leavers.
The result from this analysis, regarding the most desirable allocation of funding for tertiary students, is inconclusive; however loans are favoured as the primary form of assistance. The availability of student loans enable access due to delayed need for the payment of the education, coupled with the fact that they represent the idea that one should repay the investment they have made in their education, once benefiting from the income which their education has generated. However, may discourage students from taking part, particularly those who are debt averse (which is considered to be likely to be those who come from lower income backgrounds). Meanwhile, student allowances fully encourage student participation through aiding living costs, and reducing the need to work, are only able to help some students, due to the expense of the scheme, and it is currently limited to those who come from lower income backgrounds. The negative side of the scheme lies with the fact that identifying the students who are from lower income backgrounds can be difficult, it causes individuals to work less so they can receive more, and (often) due to a lack of reliance upon parents once reaching university age, students may not be financially able to support themselves regardless of their parent’s circumstances. A universal student allowance, while equitable, is considered out of the question due to cost.
As such, it is considered that further investigation needs to undertaken to fully determine whether student allowances should continue to be a form of financial aid to tertiary students. This analysis, while favouring loans as they are an equitable and efficient means of aiding tertiary students, considers that allowances will continue to be necessary for some students. It is considered that to ensure these are distributed in an efficient and effective manner, further investigation is given to ensure that allowances are in fact going to those who are in need, and not merely aiding students who restrict their hours of work or whose parents hide their income.
Recommendations
● That student loans are thought of as the preferential form of student financial aid, and allowances are restricted to a select group
● Further investigation is undertaken surrounding the distribution of financial aid for students in other countries
● Further analysis of those students who are receiving student allowances is undertaken with regard to parental income and assets, to determine need