NZ fees point to loan debt disaster

Just eight years after the New Zealand government introduced a flat-rate student contribution towards higher education costs, prices are soaring and some students will never repay their loans, according to research from Diane Pearce, lecturer in education policy at Newcastle University, writes Alison Utley.

Dr Pearce said some unexpected consequences emerging from New Zealand's experience should ring alarm bells in Britain. Top-up fees have quickly become the norm since the flat fee was abolished two years after it was introduced and state subsidies diminished sharply.

In one university, students are charged NZ$25,000 (Pounds 7,825) a year for a dentistry degree. "The costs for the students of undertaking higher education are becoming so high that some student dentists and doctors will never repay their student loans," said Dr Pearce, a New Zealander who is concerned about the level of her own student debt.

Cost-benefit analyses of various courses have meant negative rates of return in areas such as nursing and teaching, which must act as a disincentive for students considering these areas, Dr Pearce said. "Other worthwhile occupations that are not highly paid will also suffer."

Establishing the exact impact on participation is complex because the statistical frameworks have changed so frequently and year-on-year comparisons are difficult.

Levels of debt are easier to quantify. "At about 10 per cent interest a year, we are running to stand still, and some debts are undoubtedly bigger than mortgages at way in excess of NZ$100,000," Dr Pearce said.

For women in New Zealand the average time to repay student loans is 38 years, so questions must be raised about how much the government ever expects to recover from students.

"What seems to be emerging is that the real costs are being borne by society as a whole as the professions - lawyers, dentists, nurses - start to charge more."