Shaneel Lal wrote in the New Zealand Herald yesterday:
The new Government will change Labour’s first-year fees-free tertiary education policy to fees-free for the last year...
At first, it seems the change is to incentivise students to finish their degree, but on closer inspection, it is made primarily to make up money following the National Party’s failure to convince New Zealand First to lift the foreign buyers’ ban to fund National’s tax cuts...
However, I wonder if the order in which the fees-free year applies makes a difference. The act of having to apply for a student loan and having a debt at 17 would put off some high school leavers from getting tertiary education. University (or other tertiary education) is a daunting place to start, so adding a bureaucratic and complicated process such as applying for a student loan and having a debt of thousands could be frightening for young people.
The Government could address the concern by simplifying application processes and providing students comprehensive support to get applications in. Students would also benefit from how the loan repayment works. However, in my opinion, student support is generally appalling, particularly at universities...
The millions the Government saves from the policy change aren’t being put back into students. It will likely end up in the back pockets of uber-wealthy New Zealanders. If the Government doesn’t ensure students are not falling out of loopholes, it will rob many of their education.
Lal makes some good points. In particular, the quality of student support could definitely improve (especially financial support). However, I think that overall, the move from first-year free to last-year free is a good one, and I'm not convinced that it will reduce student numbers appreciably.
First, let's examine one key part of Lal's argument: that "the act of having to apply for a student loan and having a debt at 17 would put off some high school leavers from getting tertiary education". If applying for a loan is enough to deter 17-year-old first-year students, wouldn't it also be enough to deter 18-year-old second-year students? They have to apply for it sometime. It will be just as daunting at age 18 as it is at age 17.
However, putting that aside, the question of whether it is better to have the first-year free, or the last-year free, is an open question. As Lal notes, in terms of the overall cost to the student of their education, it should make no difference if the first year or the last year attracts no fees (except for the fact that fees do go up each year, making the last year more expensive in nominal terms [*]). However, since according to Lal only 58 percent of students complete the final year of education (and I have no reason to doubt that estimate), the cost to the government is greatly reduced by the change.
Will the number of domestic tertiary students decrease? I see little evidence of a large boost in the number of tertiary students when the first-year-fees-free policy was introduced. Here's what the data on total domestic tertiary equivalent full-time students (EFTS) looks like (source here, in the second Excel file on that page):
The first-year-fees-free policy was introduced in 2018. The trend in domestic student numbers continued its downward slide that started in 2010, through to 2020. The increase at the end is a post-COVID bump in 2021, but notice that the downward trend has resumed after that. Of course, this data isn't for first-year enrolments, which could be trending differently. However, I teach first-year university courses, and it wasn't apparent to me that there was any increase in enrolments in 2018. Of course, we don't know what the counter-factual is. Perhaps domestic tertiary enrolments would have been even lower without the policy.
Now, if we believe for a moment that the quantity of enrolments did increase as a result of the policy, there is good reason to believe that the quality of enrolments would have decreased at the same time. If the best prepared students already enrol in tertiary education, then by definition any additional enrolments must come from among students who are less well prepared for further study. We'd get more tertiary students, but the average (and marginal) student would be lower quality. This is difficult to assess, but I haven't noticed a substantial drop in the quality of first-year students. However, perhaps the margin on which additional enrolments were generated wasn't additional enrolments at university, but additional enrolments at wānanga and polytechs, and the quality of those enrolments decreased? The trend for polytech (Te Pūkenga) and wānanga enrolments was similar to the overall trend (same source as above):
Some of my colleagues were concerned that there might be an increase in the number of 'ghosts' enrolling in first-year tertiary study. 'Ghosts' are students who enrol, and then do literally nothing - they don't attend any classes, don't complete any assessments, and possibly don't do anything at all except completing their enrolment. Since the monetary cost of enrolment is eliminated by first-year-fees-free, there was an expectation that we would see more of those students as a result. I don't know what the numbers are generally, but the proportion of 'ghosts' in my first-year papers is basically identical this year to what it was in 2019. Again though, the margin for additional enrolments may have been at wānanga and polytechs, so perhaps they saw more 'ghost' enrolments?
Overall, there's little evidence of an increase in the quantity of domestic students as a result of the first-year-fees-free policy, so it seems unlikely that there would be a decrease in the quantity of domestic students when the government changes the policy to last-year-fees-free instead. Overall, we'll likely get the same number of graduates, for a lower total cost to the government.
*****
[*] And the last year might be more expensive in real terms as well, if university fees go up faster than the rate of inflation. However, allowable fee increases for 2024 and 2023 were both below the inflation rate.
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