Document 1
Tertiary Education Report: Student allowances for mature students:
further advice
Date:
22 February 2013
Priority:
High
1982
Security Level:
Budget Sensitive
METIS No: 752339
Action Sought
Act
Addressee
Actions sought
Deadline
Minister for Tertiary
note further advice on possible student allowance directions
Education, Skills and
forward this paper to the Minister for Social Development
26 February
Employment
and her Associate Minister responsible for student allowance 2013
administration, Hon Chester Borrows.
Enclosure: No
Round Robin: No
Contact for Telephone Discussion (if required)
Information
Name
Position
Telephone
1st Contact
Julie Keenan
Senior Policy Manager
463 8093
027 504 6210
Penny Pender
Drafter
463 8032
The following departments/agencies have seen this report:
Official
MBIE
IR
MoE
Treasury
MoH
MSI
MSD
NZQA
NZTE
OAG
Stats
TEC
TPK
Other
the
Minister to Complete (please circle)
1 = very poor
2 = poor
3 = acceptable
4 = good
5 = very good
Minister’s Office to Complete:
Approved
Declined
Noted
Needs change
under Seen
Overtaken by Events
See Minister’s Notes
Withdrawn
Comments:
Released
Tertiary Group – TEP
1
Tertiary Education Report: Student allowances for mature students:
further advice
Executive summary
This paper provides advice on the risks and benefits associated with reducing the student
1982
allowances lifetime entitlement from people over the age of 40, down to 80 weeks. This
report provides analysis and initial estimates of the above option and considers how this
might complement other options to target student allowances more closely based on age.
Budget 2013 decisions will be made in the context of changes needed to achieve Better
Act
Public Services targets, and before the impacts of Budget 2012 student allowance changes
are seen. We therefore recommend an incremental approach, to improve alignment with
government objectives.
We recommend you consider forwarding this paper to the Minister for Social Development
and her Associate Minister, Hon Chester Borrows, who is responsible for student allowance
administration.
Recommended actions
We recommend that the Minister for Tertiary Education, Skills and Employment:
Information
1
note the
advice on the implications of reducing the student allowances lifetime
entitlement from people over the age of 40, down to 80 weeks
2
indicate which, if any, of the options officials should develop towards Budget 2013:
Options
Reduce eligibility for those aged
Reduce eligibility for those over (X) age
Official
Y/N
Y/N
over
by lowering the 200 week lifetime cap to
40
Y/N
80 weeks
Y/N
45
Y/N
120 weeks
Y/N
the
50
Y/N
160 weeks
Y/N
55
Y/N
Y/N
60
Y/N
Y/N
65
Y/N
Y/N
AND/OR Remove eligibility from those aged over
under
55
Y/N
65 (Recommended)
Y/N
Released
2
3
forward this paper to the Minister for Social Development and her Associate Minister
responsible for student allowance administration, Hon Chester Borrows.
YES/NO
Dr Andrea Schöllmann
Group Manager
Tertiary Education
1982
Act
Hon Steven Joyce
Minister for Tertiary Education, Skills and Employment
__ __/__ __/__ __
Information
Official
the
under
Released
3
Tertiary Education Report: Student allowances for mature students:
further advice
Purpose of report
1. This paper provides advice on the implications of reducing the student allowances
lifetime entitlement from people over the age of 40, down to 80 weeks. It also provides
analysis and initial estimates of the above option and considers how this might form part
1982
of a package of other options to target student allowances more closely based on age.
Background
Act
2. On 15 February 2013 you were provided with advice on potential options for a student
allowances package for Budget 2013 (METIS 743597). This advice contained options to
target student allowances more closely based on age, and residential status, with
variants provided on age limits and lifetime entitlements.
3. On 19 February officials provided you with indicative initial estimates on the option of
reducing the student allowances lifetime entitlement from people over the age of 40,
down to 80 weeks. Subsequent work suggests this remains a reasonable estimate. This
option is likely to have the following indicative impact:
Indicative impact (annual)
Operating
Offset operating costs
Overall
Numbers affected
Information
savings ($m)
($m)
savings
Student
Student Loans
Accommodation
($m)
Allowances
Supplement
(12)
2
3
(7)
1,800
(NB: doesn’t include grand-parenting costs or administration costs/savings)
4. Flow-on costings have not been developed further. Costing assumptions are yet to be
confirmed by other agencies and implementation costs are not included. In addition, we
Official
estimate student loan capital costs will be around $2m per annum.
5. Other welfare flow-on costs (such as any to the unemployment benefit) have yet to be
considered.
the
6. Transitional arrangements are yet to be considered, but may reduce savings in the short
term. For example, you may wish to consider similar grandparenting arrangements for
students with dependants for the first year (similar to those put in place for the changes to
postgraduate eligibility). In 2011, over half of recipients (53.7%) aged over 40 had
dependants.
under
7. Amendments to the Student Allowances Regulations 1998 would be required. We have
not consulted in detail with StudyLink or Treasury at this stage.
Profile of allowance recipients over 40
8. Table 1 provides basic data about recipients over the age of 40. In 2012, there were
9,453 allowance recipients aged over 40 (around 10% of all recipients).
9. Of those over age 40, women are marginally over-represented at 56.3%. Women usually
make up around 53 – 54% of overall allowance recipients. There are some peaks within
Released
age groups, between the ages of 50 and 54 women account for over 60%, but over age
65 the proportions reverse significantly (only 37% women).
4
Table 1 – Student allowance recipients (2012) over age 40 by age and gender
Age group and
Recipients
Total
Gender
40-44
45-49
50-54
55-59
60-64
65+
5,316
Female
1,709
1,486
1,147
611
277
86
(56.3%)
4,137
Male
1,391
1,058
761
468
314
145
(43.7%)
TOTAL
3,100
2,544
1,908
1,079
591
231
9,453
1982
10. Table 2 shows numbers of recipients by ethnicity, and residency. As outlined in previous
advice (METIS 743597), Māori are over-represented among older allowance recipients.
Act
This reflects that Māori tend to study at later ages. Of recipients over age 40, Māori make
up around 20% compared to around 10% of allowance recipients overall.
11. People of Asian ethnicity are also over-represented, making up 28.5% of recipients over
age 40 (compared to around 20% of overall recipients). This increases with age; Asian
recipients account for nearly 84% of recipients over age 65.
12. Among those over 40, Europeans are under-represented at 32% (generally make up 48%
of overall allowance receipt).
Table 2 - Student allowance recipients over age 40 (2012 data) by age.
Recipients
Total
Information
40-44
45-49
50-54
55-59
60-64
65+
Age
Ethnicity^
European
1,088
856
661
285
111
18
3,019
Maori
661
560
407
190
62
7
1,887
Pasifika
279
213
140
63
16
1
712
Asian
630
598
493
429
351
194
2,695
Official
Residency
Permanent Residents
745
588
390
333
270
190
2,516
Citizens and Citizens by
2,321
1,933
1,510
738
319
39
6,860
birth
the
Refugees
34
23
8
8
2
2
77
^Categories do not include multiple ethnicities or multiple provider types, e.g. those who listed as being both European and
Maori or those studying at both a Polytechnic and a University. These groups made up small proportions of the total overall.
13. Table 3 shows numbers of recipients by provider type. Recipients aged over 40 account
for around 44.1% of allowance recipients who attend wānanga. However, this only
represents around 4.4% of total wānanga enrolments.
under
14. Allowance recipients over 40 at universities and colleges of education account for 3.9%
of allowance recipients at these providers. Comparing this to overall enrolments
(inclusive of international students), student allowance recipients aged over 40 account
for approximately:
1.1% of university enrolments
2.9% of PTE enrolments
2.5% of polytechnic enrolments
Released
4.4% of wānanga enrolments.
5
Table 3 - Student allowance recipients by age and provider (2011 data1).
Age (2011 data)
OVER
40 (%
Provider
<18
18-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65+
of total
Total
type
at level
X)
1987
Uni
35
9,712
26,404
8,195
2,568
1,164
783
568
347
213
67
9
50,065
(3.9%)
241
Schools
5
1,549
204
30
25
37
35
65
48
45
37
11
2,091
1982(11.5%)
Polytechni
3865
72
5,833
9,743
4,672
2,255
1,572
1,329
1,079
722
425
214
96
28,012
c
(13.8%)
PTE&OTE
2219
45
3,001
5,006
2,800
1,313
880
705
574
368
261
176
135
15,264
P
(14.5%)
Act 1695
wānanga
10
387
676
401
349
321
402
463
385
262
146
37
3,839
(44.1%)
Grand
20,48
16,09
10,007
167
42,033
6,510
3,974
3,254
2,749
1,870
1,206
640
288
99,271
Total
2
8
(10%)
15. Table 4 illustrates the age of recipients by level of study. The green column in table 4
shows total recipients over 40. Percentages represent those over 40 as a proportion of all
recipients at each level.
Table 4 – student allowance recipients (2011 data) age by level of study (NB: postgraduates removed)
Information
Age by level of study
level of
Over 40 (as
35-
40-
45-
50-
55-
60-
<18
18-19
20-24
25-29
30-34
65+ a % of all
Total
study
39
44
49
54
59
64
recipients)
Levels 1 – 3
2,675
63
3,273
3,743
1,827
992
738
756
720
471
370
233
125
13,311
Certificates
(20%)
Level 4
1,758
39
3,061
3,404
1,588
814
575
511
425
339
238
151
94
11,239
Certificates
(15.6%)
Levels 5 – 7
1,665
Official
18
2,273
4,533
2,383
1,096
775
608
462
317
177
79
22
12,743
Diplomas
(13%)
Level 7
Bachelor’s
2,915
38
9,517
25,696
7,683
2,769
1,468 1,079
884
564
280
96
12
50,086
(5.8%)
degrees
the
Non-formal
-
-
1
-
-
-
1
-
-
-
-
-
1 (50%)
2
357
Error2
5
1,611
373
109
65
64
63
90
65
58
53
28
2,584
(13.8%)
Grand Total
167
20,482 42,033
16,098
6,510
3,974
3,254 2,749 1,870 1,206 640
288
10,007
99,271
16. While recipients over age 40 appear in higher numbers at Bachelor’s level (29.1% of
under
recipients over age 40), they account for only 5.8% of all recipients at Bachelor’s level.
This is compared to levels 1 – 3 where those over 40 make up 20% of all recipients at
this level.
17. However, counting all study levels below Bachelor’s level shows that over 60% of
recipients over age 40 are studying at sub-degree level.
Student allowance payments
18. The total amount of student allowance paid (including accommodation benefit) to
Released
recipients aged 40 and over in 2012 was $86.2m. It is estimated that reducing entitlement
1 Tables in this paper use some data from the 2011 year and some from the 2012 year (some 2012 data is yet to become
available).
2 The majority of data errors are the result of level of study not being recorded for those at secondary schools.
6
for these people down to 80 weeks would produce annual savings of $7m (as outlined in
paragraphs 3 – 5). This is largely because the majority of student allowance recipients
only access the student allowance for around 80 weeks.
19. Table 5 demonstrates this. Over the age of 40, 80% of people are only using 80 weeks of
allowance. Overall, 76.1% of people are only accessing 80 weeks of allowance. People
between the ages of 20 and 29 tend to access the allowance for longer (around 30% of
these people exceed 80 weeks). This is likely due to the cut off age for parental income
testing at 24 (more students becoming eligible for an allowance when they turn 24).
20. Data for 2004 – 2012 shows the average number of weeks of allowance accessed across
1982
the allowance scheme is 56.7 weeks. For people aged over 40, the average is slightly
lower at 51 weeks. Data from previous years indicates recipients studying at sub-degree
level used on average 38.86 weeks compared to 73.24 weeks at degree level. Māori
Act
used an average of 40.10 weeks compared to 66.26 for Asian recipients and 57.19 for
European recipients. Recipients with no dependants (55.88 weeks) had a higher average
than those with dependents (48.74 weeks).
Table 5 – proportion of people accessing the student allowance for under 80 weeks, 120
weeks
Proportion of people accessing the student allowance for under X weeks
Aged
Aged
Aged
Aged
Aged
Aged
Aged
Aged
Aged
Aged
Aged
Aged
Aged
Aged
<18
18-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65+
Overall
<40
40+
Under 80
weeks
100.0%
99.0%
71.0%
69.1%
81.2%
81.2%
82.0%
80.8%
79.3%
77.6%
76.7%
75.2%
76.1%
75.4%
80.0%
Under
120
weeks
100.0%
99.9%
87.4%
84.8%
93.3%
92.9%
93.5%
92.5%
91.3%
90.5%
89.8%
89.2%
89.6%
89.1%
92.0%
Information
Options
21. This paper sets out a menu of options on the theme of limiting student allowances for
mature students.
Official
Reduce eligibility for those over (X) age by
Reduce eligibility for those aged over
lowering the 200 week lifetime cap to
40
80 weeks
the
45
120 weeks
50
160 weeks
55
60
65
under
AND/OR Remove eligibility from those aged over
55
65 (Recommended)
22. Any option to reduce eligibility for people over a certain age could be combined with
removing allowance eligibility completely from those aged over 65. This would create a
tiered structure of reducing eligibility as people age. This tiered structure would be
characterised by reduced eligibility in line with lifetime limits over certain ages, with
eligibility entirely removed by the age of 65.
23. The main advantage of using lifetime limits to target student allowances is they are a
Released
simple means by which previous access can be measured. In the absence of creating a
more complex and costly administrative system, it can be used as a rough proxy for
existing qualifications, or at least the amount of prior education for which a person has
already received government support for. Lifetime limits are also more flexible in
7
responding to people’s individual study needs. Options in this category are likely to be
perceived as fairer than blunt age limits on eligibility for this reason.
24. The 200 week limit provides approximately five years worth of student support (based on
a 40 week year). Reducing the 200 week lifetime entitlement for people over a certain
age, for example to 80 weeks (approximately two years of study) would reduce spending
while still providing a pathway for people who may require upskilling to support
themselves, or who missed out on foundation level education earlier in life.
25. 80 weeks would generally enable a person to complete up to 240 credits of study. This
would enable people to undertake foundation level study or most certificates and
1982
diplomas (depending on their education needs). It would not be sufficient to cover degree
level study. Students aged under 55 would be able to continue studying with student loan
support.
Act
26. A reduced lifetime limit put in place from a certain age would continue to enable people to
add to their skills later in life to allow them to continue to participate in the labour force,
which recognises some of the training needs of an aging workforce. It is consistent with
refocusing of allowance on initial years of study; while it may have an impact on some
second chance learners, it would pose less of a risk than a blunt removal of eligibility.
27. An option of this nature would reduce opportunities for misuse, but not completely
eliminate any chance of the scheme being used as an alternative form of living support.
28. Removing eligibility based on age results in higher savings than options of reduced
lifetime limits, but at higher risk to access to tertiary education. Those affected would still
have access to tuition subsidies and interest-free student loans for course fees and living
Information
costs (for those under 55).
29. For that reason we recommend considering removing student allowance eligibility for
those aged over 65. Below is a summary of costings for student allowance options based
on age and lifetime limits previously provided to you.
Table 7: summary of costings previously provided
Total Savings -
People
Official
Option
Allowance and
TOTAL COSTS GRAND TOTAL
affected
UBSH (pa) (net)
1a. Remove SA eligibility from those aged
65 ($9.37m) total
$1.53m total
($7.84m) total
310 pa
the
and over
four years
four years
four years.
1b. Remove SA eligibility from those aged
55 ($55.35m)
$16.05m total
($39.30m) total
1,773 pa
and over
total four years
four years
four years.
2a. Restrict SA eligibility from those aged 55
($10.60m)
$3.24m total
($7.35m) total
and over, by lowering the 200 week lifetime
385 pa
total four years
four years
four years.
cap to
80 weeks
under
2b. Restrict SA eligibility from those aged 55
($3.61m) total
$1.8m total
($1.81m) total
and over, by lowering the 200 week lifetime
155 pa
four years
four years
four years.
cap to
120 weeks
Risks
30. If an age band is chosen as a means of prioritising access to student allowances, the
younger any age band is set the more risk is posed to government objectives about
access to tertiary education. A number of people who may have substantially benefited
Released
from tertiary study (including those within target learner groups) may no longer have the
support student allowances provide for access to tertiary education, although most will
have continued access to student loans. This is less of a risk for reduced lifetime limits
than it is for removing eligibility altogether.
8
31. The lower any potential age cut off is set the more this is likely to unduly affect certain
groups (such as Māori who tend to study at a later age) and be seen to disadvantage
parents, particularly Māori and Pasifika women who tend to have children at younger
ages than European and Asian women.
32. Some of these impacts could increase the chances of a successful legal challenge under
the New Zealand Bill of Rights Act 1990 (BoRA). Further detail on these risks was
provided to you in METIS 743597.
1982
Next steps
33. Initial indications are that further savings may be needed to balance Budget 2013,
potentially including further student loan and allowance options (METIS 752343 refers to
Act
student loan options, METIS 743597 refers to allowances options).
34. All options in this paper would require an amendment to the Student Allowances
Regulations 1998.
35. Further detail on costs, savings and implementation issues will form the next stage of
advice once preferred options for Budget 2013 have been identified. Officials seek your
feedback on which, if any, of the options in this paper to progress.
Information
Official
the
under
Released
9
1982
Act
Information
Official
the
under
Released
Document 2
Tertiary Education Report: Student allowances for mature students:
update
Date:
26 February 2013
Priority:
High
1982
Security Level:
Budget Sensitive
METIS No: 753449
Action Sought
Act
Addressee
Actions sought
Deadline
Minister for Tertiary
note further advice on possible student allowance directions
Education, Skills and
forward this paper to the Minister for Social Development
26 February
Employment
and her Associate Minister responsible for student allowance 2013
administration, Hon Chester Borrows.
Enclosure: No
Round Robin: No
Contact for Telephone Discussion (if required)
Information
Name
Position
Telephone
1st Contact
Julie Keenan
Senior Policy Manager
463 8093
027 504 6210
Penny Pender
Drafter
463 8032
The following departments/agencies have seen this report:
Official
MBIE
IR
MoE
Treasury
MoH
MSI
MSD
NZQA
NZTE
OAG
Stats
TEC
TPK
Other
the
Minister to Complete (please circle)
1 = very poor
2 = poor
3 = acceptable
4 = good
5 = very good
Minister’s Office to Complete:
Approved
Declined
Noted
Needs change
under Seen
Overtaken by Events
See Minister’s Notes
Withdrawn
Comments:
Released
Tertiary Group – TEP
1
Tertiary Education Report: Student allowances for mature students:
further advice
Executive summary
This paper provides advice on the risks and benefits associated with reducing the student
1982
allowances lifetime entitlement for people aged 35 and over, down to 80 weeks. This report
provides analysis and initial estimates of the above option and considers how this might
complement other options to target student allowances more closely based on age.
Budget 2013 decisions will be made in the context of changes needed to achieve Better
Act
Public Services targets, and before the impacts of Budget 2012 student allowance changes
are seen. We therefore recommend an incremental approach, to improve alignment with
government objectives.
We recommend you consider forwarding this paper to the Minister for Social Development
and her Associate Minister, Hon Chester Borrows, who is responsible for student allowance
administration.
Recommended actions
We recommend that the Minister for Tertiary Education, Skills and Employment:
Information
1
note the
advice on the implications of reducing the student allowances lifetime
entitlement for people aged 35 and over, down to 80 weeks
2
indicate which, if any, of the options officials should develop towards Budget 2013:
Options
Reduce eligibility for those from
Reduce eligibility for those over (X) age
Official
Y/N
Y/N
age
by lowering the 200 week lifetime cap to
35
Y/N
80 weeks
Y/N
40
Y/N
120 weeks
Y/N
the
45
Y/N
160 weeks
Y/N
50
Y/N
55
Y/N
60
Y/N
65
Y/N
under
AND/OR Remove eligibility from those aged over
55
Y/N
65 (Recommended)
Y/N
Released
2
3
forward this paper to the Minister for Social Development and her Associate Minister
responsible for student allowance administration, Hon Chester Borrows.
YES/NO
Dr Andrea Schöllmann
Group Manager
Tertiary Education
1982
Act
Hon Steven Joyce
Minister for Tertiary Education, Skills and Employment
__ __/__ __/__ __
Information
Official
the
under
Released
3
Tertiary Education Report: Student allowances for mature students:
update
Purpose of report
1. This paper provides advice on the implications of reducing the student allowances
lifetime entitlement for people aged 35 and over, down to 80 weeks. It also provides
analysis and initial estimates of the above option and considers how this might form part
1982
of a package of other options to target student allowances more closely based on age.
Background
Act
2. On 22 February 2013 you were provided with advice on the implications of reducing the
student allowances lifetime entitlement for people aged 40 and over, down to 80 weeks
(METIS 752339). This advice contained options to target student allowances more
closely based on age, with variants provided on age limits and lifetime entitlements.
3. This paper contains a variant option, of reducing the student allowances lifetime
entitlement for people aged 35 and over, down to 80 weeks. In addition, estimates
previously provided to you on 22 February (targeting those aged 40 and over) have now
been updated to reflect forecast volumes of enrolment for 2014-2017 and have shifted
because of greater refinement in the costing methodology.
4. Initial estimates for both of these options are provided below and suggest the following
Information
indicative impact:
Indicative impact (annual)
Restrict SA
Operating
Offset operating costs
Overall
Numbers
SL
entitlement
savings
($m)
savings
affected
Capital
to 80 weeks
($m)
($m)
costs
for
those
Student
Student
Accommodation
aged
Allowances
Loans
Supplement
Official
35 and
(15.8)
4.5
4.0
(7.3)
2,000
3.1
over
40 and
(11.9)
3.0
3.0
(5.9)
1,500
2.1
over1
the
(NB: doesn’t include grand-parenting costs or administration costs/savings)
5. These are indicative costings only. While the table shows figures to the nearest
$100,000 (for comparative purposes), this does not indicate accuracy at this level. Flow-
on costings require further refinement. Costing assumptions are yet to be confirmed by
other agencies and implementation costs are not included.
under
6. Other welfare flow-on costs (such as any to the unemployment benefit) have yet to be
considered but would likely decrease overall savings.
7. Transitional arrangements are yet to be considered, but may reduce savings in the short
term. For example, you may wish to consider similar grandparenting arrangements for
students with dependants for the first year (similar to those put in place for the changes to
postgraduate eligibility).
8. People aged 35 and over are more likely to have dependants; in 2011, 9,386 recipients
over age 30 had dependants (approximately 46% of recipients over 30 – and 53.7% of
recipients over 40).
Released
9. Amendments to the Student Allowances Regulations 1998 would be required. We have
not consulted in detail with StudyLink or Treasury at this stage.
1 estimates previously provided have shifted because of greater refinement in the costing methodology.
4
Profile of allowance recipients 35 and over
10. Table 1 provides basic data about recipients aged 35 and over. In 2012, there were
13,170 allowance recipients aged 35 and over (around 13% of all recipients).
11. Of those aged 35 and over, gender balance is approximately the same as for the scheme
overall (women are represented at 53.8% and usually make up around 53 – 54% of
overall allowance recipients.) There are some peaks within age groups, between the
ages of 50 and 54 women account for over 60%, but over age 65 the proportions reverse
significantly (only 37% women).
1982
Table 1 – Student allowance recipients (2012) from age 35 by age and gender
Age group and
Recipients
Total
Act
Gender
35-39
40-44
45-49
50-54
55-59
60-64
65+
7,091
Female
1,775
1,709
1,486
1,147
611
277
86
(53.8%)
6,079
Male
1,942
1,391
1,058
761
468
314
145
(46.2%)
TOTAL
3,717
3,100
2,544
1,908
1,079
591
231
13,170
12. Table 2 shows numbers of recipients by ethnicity, and residency. As outlined in previous
advice (METIS 743597), Māori are over-represented among older allowance recipients.
This reflects that Māori tend to study at later ages. Of recipients aged 35 and over, Māori
make up 19.5% compared to around 10% of allowance recipients overall.
Information
13. People of Asian ethnicity are also over-represented, making up 24.7% of recipients aged
35 and over (compared to around 20% of overall recipients). This increases with age;
Asian recipients account for nearly 84% of recipients over age 65.
14. Among those aged 35 and over, Europeans are under-represented at 34% (generally
make up 48% of overall allowance receipt).
Official
Table 2 - Student allowance recipients from age 35 (2012 data) by age.
Recipients
Total
35-39
40-44
45-49
50-54
55-59
60-64
65+
Age
the
Ethnicity^
European
1,514
1,088
856
661
285
111
18
4,533
Maori
682
661
560
407
190
62
7
2,569
Pasifika
336
279
213
140
63
16
1
1,048
Asian
552
630
598
493
429
351
194
3,247
under
Residency
Permanent Residents
785
745
588
390
333
270
190
3,301
Citizens and Citizens by
2,888
2,321
1,933
1,510
738
319
39
9,748
birth
Refugees
44
34
23
8
8
2
2
121
^Categories do not include multiple ethnicities or multiple provider types, e.g. those who listed as being both European and
Maori or those studying at both a Polytechnic and a University. These groups made up small proportions of the total overall.
15. Table 3 shows numbers of recipients by provider type. Recipients aged 35 and over
account for around 52.5% of allowance recipients who attend wānanga. However, this
only represents around 5.2% of total wānanga enrolments.
Released
16. Allowance recipients aged 35 and over at universities account for 6.3% of allowance
recipients at these providers. Comparing this to overall enrolments (inclusive of
5
international students), student allowance recipients (by provider) aged 35 and over
account for approximately:
1.8% of university enrolments
4.1% of PTE enrolments
3.5% of polytechnic enrolments
5.2% of wānanga enrolments.
Table 3 - Student allowance recipients by age and provider (2011 data2).
Age (2011 data)
1982
35+ (%
Provider
of total
<18
18-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65+
Total
type
at level
X)
Act 3,151
Uni
35
9,712
26,404
8,195
2,568
1,164
783
568
347
213
67
9
50,065
(6.3%)
278
Schools
5
1,549
204
30
25
37
35
65
48
45
37
11
2,091
(13.3%)
5,437
Polytechnic
72
5,833
9,743
4,672
2,255
1,572
1,329
1,079
722
425
214
96
28,012
(19.4%)
3,099
PTE&OTEP
45
3,001
5,006
2,800
1,313
880
705
574
368
261
176
135
15,264
(20.3%)
2,016
wānanga
10
387
676
401
349
321
402
463
385
262
146
37
3,839
(52.5%)
Grand
13,981
167 20,482
42,033
16,098 6,510
3,974
3,254
2,749
1,870
1,206
640
288
99,271
Total
(14%)
17. Table 4 illustrates the age of recipients by level of study. The green column in table 4
Information
shows total recipients aged 35 and over. Percentages represent those 35 and over as a
proportion of all recipients at each level. Grand totals in this table have been calculated
including level 8, however level 8 includes some postgraduate diplomas and certificates
that will no longer be eligible. In 2011 Levels 1 – 8 (including non-formal recipients and
missing data) there were 95,506 student allowance recipients.
Table 4 – student allowance recipients (2011 data) age by level of study (NB: Masters and Doctorals removed)
Age by level of study
Official
35+ (as a %
level of
of all
<18
18-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65+
Total
study
recipients
by level)
Levels 1 –
the
3,413
3
63
3,273
3,743
1,827
992
738
756
720
471
370
233
125
13,311
Certificates
(25.6%)
Level 4
2,333
39
3,061
3,404
1,588
814
575
511
425
339
238
151
94
11,239
Certificates
(20.8%)
Levels 5 –
2,440
18
2,273
4,533
2,383
1,096
775
608
462
317
177
79
22
12,743
7 Diplomas
(19.1%)
Level 7
under
Bachelor’s
4,383
38
9,517
25,696
7,683
2,769
1,468
1,079
884
564
280
96
12
50,086
degrees
(8.8%)
Level 8
Honours/
3173
4
745
3,277
958
240
110
86
52
36
27
5
1
5,541
Postgrad
(5.7%)
dips+certs)
1
Non-formal
-
-
1
-
-
-
1
-
-
-
-
-
2
(50%)
421
Error4
5
1,611
373
109
65
64
63
90
65
58
53
28
2,584
(16.3%)
13,308
Total
167 20,480
41,027
14,548 5,976
3,730
3,104
2,633
1,792
1,150
617
282
95,506
(14.4%)
Released
2 Tables in this paper use some data from the 2011 year and some from the 2012 year (some 2012 data is yet to become
available).
3 Includes some postgraduate diplomas and certificates no longer eligible
4 The majority of data errors are the result of level of study not being recorded for those at secondary schools.
6
18. While recipients aged 35 and over appear in higher numbers at Bachelor’s level (32.9%
of recipients aged 35 and over at levels 1 - 8), they account for only 8.8% of all recipients
at Bachelor’s level. This is compared to levels 1 – 3 where those aged 35 and over make
up 25.6% of all recipients at this level.
19. Counting all study levels below Bachelor’s level shows that 8,186 student allowance
recipients were studying at sub-degree level. At levels 1 – 8 this represents around 8.5%
of recipients and 62% of recipients over the age of 35.
1982
Student allowance payments
20. The total amount of student allowance paid (including accommodation benefit) to
recipients aged 35 and over in 2012 was $117.4m. It is estimated that reducing
Act
entitlement for these people down to 80 weeks would produce annual savings of $7.3m
(as outlined in paragraphs 3 – 5). This is largely because the majority of student
allowance recipients only access the student allowance for up to 80 weeks.
21. Table 5 demonstrates this. At ages 35 and over, around 80% of people are using less
than 80 weeks of allowance. Overall, 76.1% of people are only accessing 80 weeks (or
less) of allowance. People between the ages of 20 and 29 tend to access the allowance
for longer (around 30% of these people exceed 80 weeks). This is likely due to the cut off
age for parental income testing at 24 (more students becoming eligible for an allowance
when they turn 24).
22. Data for 2004 – 2012 shows the average number of weeks of allowance accessed across
the allowance scheme is 56.7 weeks. For people aged over 40, the average is slightly
Information
lower at 51 weeks. Data from previous years indicates recipients studying at sub-degree
level used on average 38.86 weeks compared to 73.24 weeks at degree level. Māori
used an average of 40.10 weeks compared to 66.26 for Asian recipients and 57.19 for
European recipients. Recipients with no dependants (55.88 weeks) had a higher average
than those with dependents (48.74 weeks).
Table 5 – proportion of people accessing the student allowance for under 80 weeks, 120
Official
weeks
Proportion of people accessing the student allowance for under X weeks
the
Aged
Aged
Aged
Aged
Aged
Aged
Aged
Aged
Aged
Aged
Aged
Aged
Aged
Aged
<18
18-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65+
Overall
<40
40+
Under 80
weeks
100.0%
99.0%
71.0%
69.1%
81.2%
81.2%
82.0%
80.8%
79.3%
77.6%
76.7%
75.2%
76.1%
75.4%
80.0%
Under
120
weeks
100.0%
99.9%
87.4%
84.8%
93.3%
92.9%
93.5%
92.5%
91.3%
90.5%
89.8%
89.2%
89.6%
89.1%
92.0%
under
Options
23. This paper sets out a menu of options on the theme of limiting student allowances for
mature students.
Released
7
Options
Reduce eligibility for those over (X) age by lowering the 200
Reduce eligibility for those from age
week lifetime cap to
35
80 weeks
40
120 weeks
45
160 weeks
50
55
1982
60
65
AND/OR Remove eligibility from those aged over
Act
55
65 (Recommended)
24. Any option to reduce eligibility for people over a certain age could be combined with
removing allowance eligibility completely from those aged over 65. This would create a
tiered structure of reducing eligibility as people age.
25. The main advantage of using lifetime limits to target student allowances is they are a
simple means by which previous access can be measured. In the absence of creating a
more complex and costly administrative system, it can be used as a rough proxy for
existing qualifications, or at least the amount of prior education for which a person has
already received government support. Lifetime limits are also more flexible in responding
to people’s individual study needs. Options in this category are likely to be perceived as
Information
fairer than blunt age limits on eligibility for this reason.
26. The current 200 week limit provides approximately five years worth of student support
(based on a 40 week year). Reducing the 200 week lifetime entitlement for people over a
certain age, for example to 80 weeks (approximately two years of study) would reduce
spending while still providing a pathway for people who may require upskilling to support
themselves, or who missed out on foundation level education earlier in life.
Official
27. 80 weeks would generally enable a person to complete up to 240 credits of study. This
would enable people to undertake foundation level study or most certificates and
diplomas (depending on their education needs). It would not be sufficient to cover degree
level study. Those affected would still have access to tuition subsidies and interest-free
the
student loans for course fees and living costs (for those under 55).
28. A reduced lifetime limit put in place from a certain age would continue to enable people to
add to their skills later in life to allow them to continue to participate in the labour force,
which recognises some of the training needs of an aging workforce. It is consistent with
refocusing of allowance on initial years of study; while it may have an impact on some
second chance learners, it would pose less of a risk than a blunt removal of eligibility.
under
29. An option of this nature would reduce opportunities for misuse, but not completely
eliminate any chance of the scheme being used as an alternative form of living support.
Over 65s
30. Removing eligibility based on age results in higher savings than options of reduced
lifetime limits, but at higher risk to access to tertiary education.
31. We recommend considering removing student allowance eligibility for those aged over
65. In 2012 nearly 82.3% of student allowance recipients over age 65 were permanent
Released
residents (compared to 15% of overall recipients). Significant over-representation of
permanent residents at older ages suggests some may be accessing the allowance as an
alternative to other forms of living support (permanent residents are less likely to qualify
8
for New Zealand superannuation5, and the allowances scheme does not have a work test
as in the benefit system).
32. The benefits of providing this support are not well aligned to the objectives of the student
allowances scheme. Study undertaken by these students is unlikely to have significant
economic benefits for New Zealand, as these people are unlikely to enter the labour
market. Social benefits (for example improving English-language skills) could be
achieved through part-time study (not eligible for an allowance) or adult and community
education.
33. New Zealand citizens who qualified for Superannuation would effectively not be at a
1982
disadvantage by removal of student allowances for people over age 65. This is because
there is already a restriction on receiving the student allowance if in receipt of New
Zealand Superannuation.
Act
Impact of options
34. Below is a summary of costings for student allowance options based on age and lifetime
limits previously provided to you. All options in this paper would require an amendment to
the Student Allowances Regulations 1998.
Table 7: summary of costings previously provided
Total Savings -
People
Option
Allowance and
TOTAL COSTS GRAND TOTAL
affected
UBSH (pa) (net)
Information
1a. Remove SA eligibility from those aged
65 ($9.37m) total
$1.53m total
($7.84m) total
310 pa
and over
four years
four years
four years.
1b. Remove SA eligibility from those aged
55 ($55.35m)
$16.05m total
($39.30m) total
1,773 pa
and over
total four years
four years
four years.
2a. Restrict SA eligibility from those aged 55
($10.60m)
$3.24m total
($7.35m) total
and over, by lowering the 200 week lifetime
385 pa
total four years
four years
four years.
Official
cap to
80 weeks
2b. Restrict SA eligibility from those aged 55
($3.61m) total
$1.8m total
($1.81m) total
and over, by lowering the 200 week lifetime
155 pa
four years
four years
four years.
cap to
120 weeks
the
Student
Student
People
As flow Total (pa)
Options
allowance
loan
(implementation
affected
on
savings ($m)
flow on
costs TBC)
Restrict SA eligibility from those aged
40 (11.9)
1,500
3.0
3.0
(5.9)
under
and over, by lowering the 200 week lifetime
cap to
80 weeks6
Restrict SA eligibility from those aged
35 (15.8)
2,000
4.5
4.0
(7.3)
and over, by lowering the 200 week lifetime
cap to
80 weeks
Released
5 To qualify for New Zealand Superannuation you must be 65 years or older and you must also have lived in New
Zealand for at least 10 years since you turned 20. Five of those years must be since you turned 50.
6 estimates previously provided have shifted because of greater refinement in the costing methodology.
9
Risks
35. If age is chosen as a means of prioritising access to student allowances, the younger any
age limit is set the more risk is posed to government objectives about access to tertiary
education. A number of people who may have substantially benefited from tertiary study
(including those within target learner groups) may no longer have the support student
allowances provide for access to tertiary education, although most will have continued
access to student loans. This is less of a risk for reduced lifetime limits than it is for
removing eligibility altogether.
1982
36. The lower any potential age cut off is set the more this is likely to unduly affect certain
groups (such as Māori who tend to study at a later age) and be seen to disadvantage
parents, particularly Māori and Pasifika women who tend to have children at younger
ages than European and Asian women.
Act
37. People aged 35 and over are more likely to have dependants; in 2011, 9,386 recipients
over age 30 had dependants (approximately 46% of recipients over 30 – and 53.7% of
recipients over 40). For those affected students who support dependants, the amount
which can be borrowed for living costs through the student loan scheme plus
accommodation supplement may end up being less than the amount of student
allowance plus accommodation benefit they can currently receive. This could have an
additional impact on access objectives.
38. Some of these impacts could increase the chances of a successful legal challenge under
the New Zealand Bill of Rights Act 1990 (BoRA). Further detail on these risks was
provided to you in METIS 743597.
Information
Next steps
39. Further detail on costs, savings and implementation issues will form the next stage of
advice once preferred options for Budget 2013 have been identified. Officials seek your
feedback on which, if any, of the options in this paper to progress.
40. Initial indications are that further savings may be needed to balance Budget 2013,
Official
potentially including further student loan and allowance options (METIS 752343 refers to
student loan options, METIS 743597 refers to allowances options).
the
under
Released
10
Document 3
Aide Memoire: Tertiary education package for Budget 2013, Cabinet, 15 April
2013
Date:
12 April 2013
Priority:
High
Security Level:
Budget Sensitive
METIS No: 768522
1982
File Number
ED 30 44 00 2
Act
The attached aide memoire supports your discussion of the changes to the tertiary education
package for Budget 2013 at Cabinet on Monday 15 April 2013.
Information
Roger Smyth
Acting Group Manager, Tertiary Education
Ministry of Education
Official
the
under
Released
Aide Memoire: Tertiary education package for Budget 2013, Cabinet, 15 April
2013
1982
I am amending my tertiary package for Budget 2013, as recommended by Cabinet Business
Committee to Cabinet on 2 April 2013.
Act
The changes I am making to my tertiary package are as follows:
Closing the existing difference between the current Student Achievement Component
funding rates for private training establishments and tertiary education institutions
($28.7 million over four years).
Including, as an option, a variant on the initiative to reduce student allowance
entitlement for those aged 40 and over from 200 weeks to 80 weeks. The new variant
will reduce entitlement to 120 weeks. This variant has not been costed in detail.
However, it is likely to result in a marginal reduction of savings of as much as 60% for
this initiative.
Rolling forward the operating contingency ‘Transitional Funding for Industry Training’
Information
to 2013/14. This will assist with a smooth transition to the reformed industry training
system and the impact of the Industry Training Reboot (the contingency balance is
$7.5 million).
Rolling forward the capital contingency ‘Development of Real-time Single Data Return
System’ to 2013/14. Planning and decision-making to achieve the full Tertiary
Information Future State vision has taken longer than expected due to agency
Official
capability and capacity as well as the complexity and breadth of the programme (the
contingency balance is $8 million).
Minor technical changes, including:
the
o removing the words ‘in principle’ from recommendation 11 in the overall
tertiary paper, to reflect that the transfer from the industry training underspend
to Māori and Paskifika Trades training wil be a permanent change in the
baseline
under
o changing one word in recommendation 4 in the student support package, to
reflect that the information-matching agreement will be established by 1 April
2014, rather than from 1 April 2014.
The paper also notes that the Vote Science and Innovation package for Budget 2013
includes $10 million per annum to scale up Education New Zealand’s marketing and industry
capability-building activities. The paper notes that $10 million per annum will be allocated
from the operating allowance to Vote Tertiary for Education New Zealand’s initiative.
Released
2
Document 4
Budget Sensitive
Office of the Minister for Tertiary Education, Skills and Employment
Office of the Minister of Revenue
Cabinet
1982
Student support package for Budget 2013
Act
Proposal
1.
This paper seeks Cabinet’s agreement to changes to the Student Loan and Allowances
Schemes for Budget 2013.
Executive summary
2.
The tertiary education package for Budget 2013 aims to improve the contribution of
tertiary education to economic growth by increasing the proportion of young people with
higher level qualifications and by ensuring that New Zealand’s skil s base supports the
Information
needs of industry and encourages innovation. The student support initiatives outlined in
this paper enable us to achieve our priorities through Budget 2013, as set out in the
accompanying Cabinet paper
Tertiary Education Package for Budget 2013. The
student support initiatives will improve the value of the Government’s expenditure on
student support, and provide further savings to reprioritise to meet our wider tertiary
education goals.
Official
3.
Our main priority for improving the performance of the Student Loan Scheme in this
Budget is to improve repayments from overseas-based borrowers and to increase
personal responsibility for debt repayment. Our emphasis is also on ensuring that the
adjustments we make now will improve the value of the scheme in the future.
the
4.
In addition to extending our Overseas-Based Borrower Initiative (OBBCI), for which
funding is being sought from the Vote Revenue Budget package, we propose the
following:
a. Extending the current student loan and student allowances stand-down period for
permanent residents (including Australians) from 2 years to 3 years from 1
under
January 2014 to increase our confidence that permanent residents will stay in
New Zealand when they finish their study and repay their student loans.
b. Putting in place an ongoing information-sharing agreement between Inland
Revenue and Internal Affairs to obtain further contact details from overseas-based
borrowers and liable parents when they renew or apply for their passport.
c. Adjusting the overseas-based borrower repayment regime (from 1 April 2014 for
the 2014/15 tax year and beyond) to improve the long term sustainability of the
scheme by speeding up repayments of compliant overseas-based borrowers and
ensuring they can make progress on their loans. We aim to achieve this by:
Released
Introducing a fixed repayment obligation for overseas-based borrowers that is
set at no less than their annual obligation from the time they become an
overseas-based borrower. If the borrower is already overseas, their repayment
obligation will remain at the rate they face at 1 April 2014.
1
Adding higher repayment thresholds for overseas-based borrowers with larger
student loans.
d. Making it an offence for a borrower to knowingly default on an overseas-based
borrower repayment obligation so that an arrest warrant can be requested to
prevent the most non-compliant borrowers from leaving the country from 1 July
2013.
5.
As we continue to recover from the economic downturn, we propose to continue
1982
improving the value of student support spending in this Budget by targeting student
allowances more tightly on the basis of returns to study and on initial years of study
through:
Act
e. Reducing student allowance entitlement for those aged 40 and over to a
maximum of 80 weeks from 1 January 2014 (or variant of reducing entitlement for
those aged 40 and over to a maximum of 120 weeks).
f. Removing student allowances eligibility for those aged 651 and over from 1
January 2014.
6.
The student support package also includes the following initiatives:
Changing the way the cost of lending is calculated in the Student Loan Scheme,
by linking the calculation to prevailing interest rates. This initiative will bring the
calculation into alignment with accounting standards. The savings that result from
Information
this change will begin in the 2012/13 financial year.
Administrative funding to enable StudyLink to administer recent changes related
to level 1 and 2 Student Achievement Component provision agreed to by Cabinet
last year whereby a student undertaking fees-free study cannot access the fee
component of a student loan and under 18 years old enrolled in fees-free places
are ineligible to borrow through the Student Loan Scheme [CAB Min (12) 21/5A
Official
refers].
7.
Amendments to the Student Loan Scheme Act 2011 are required for initiatives (c) and
(d) above. Amendments to the District Court Rules 2009 are also needed for initiative
(d). Amendments to the Student Allowances Regulations are required for initiatives (e)
the
and (f) and for extending the student allowance stand-down for permanent residents in
initiative (a).
8.
The operating impact of the package for the 2013/14 to 2016/17 financial years is
estimated to be a saving of $109.569 million. The debt impact over the same period is
estimated to be a saving of $7.436 million.2
under
9.
The major overall impacts of the package are that it:
reduces the student loan write-down from 39.09 cents in the dollar to 34.92 cents
in the dollar (which includes a reduction to 34.89 cents in the dollar from the
student support package and an increase of 0.03 cents in the dollar from the
tertiary education package)
Released
1 This would be linked to the age of eligibility for New Zealand Superannuation. This means that if the eligibility
age of New Zealand Superannuation increases so too would the age at which student allowances eligibility is
removed.
2 This includes the option to reduce student allowance entitlement for those aged 40 and over from 200 weeks to
80 weeks. The 120 week variant is yet to be costed in detail but is likely to reduce the savings of this initiative by
as much as 60%.
2
reduces the repayment times for the almost 30,000 overseas-based student loan
borrowers who have loan balances above $15,000, providing they comply with
their obligations
on average, removes student allowances eligibility for approximately 2,860
students a year and reduces the cost of student allowances by $61.807 million
over four years (2013/14 to 2016/17).
Background
1982
10. The student support system is designed to reduce financial barriers to participation in
tertiary education. With the Government’s commitment to providing near universal
student loans and maintaining high levels of tertiary education participation, it is
Act
important that student support Budget policy changes continue to meet the objective of
improving value for the Government, particularly during difficult economic times.
11. The Student Loan Scheme provides broad access to upfront finance with repayments to
be met from future earnings. Loans involve a lower level of government subsidy than
allowances, so they are a means of managing the trade-offs between access to study
and affordability for Government.
12. Student allowances aim to address the financial barriers to study for low income groups.
They assist people to enter tertiary education who have very little upfront cash or family
resources, and who heavily discount the future benefits of qualifications. Student
allowances also provide additional support for students with higher financial needs, for
Information
example those with dependants.
13. The Government spends a significant amount of money on student support each year.
In 2011/12, the Government spent $2,255 million on tuition subsidies, students drew
$1,586 million in new student loan lending, and the Government paid $649 million for
student allowances. Tuition subsidies, student loans and student allowances combined
have represented between 6% and 7% of core Crown expenditure in each year
Official
between 1994/5 and 2011/12.
14. The figure below shows the growth of student allowance expenditure since 2008 and
the impact of the changes we have made to student loan policy, which has contributed
the
to the decrease in student loan expenditure.
Figure 1: Student allowances and loan expenditure
Student allowances expenses
0.7
under
0.6
0.5
s 0.4
llion
bi 0.3
$ 0.2
0.1
0.0
1
3
5
7
9
1
3
5
7
/0
/0
/0
/0
/0
/1
/1
/1
/1
0
2
4
6
8
0
2
4
6
0
0
0
0
0
1
1
1
1
0
0
0
0
0
0
0
0
0
2
2
2
2
2
2
2
2
2
Released
Actual
Forecast
15. OECD countries spend, on average, 20.5% of their public budgets for tertiary education
on financial aid to students. New Zealand spends more than double this proportion
3
(43.1%), and is second behind the UK (54.2%) on the proportion of total public tertiary
education expenditure that supports students.
Problem definition
Student allowances
16. Government expenditure on student allowances has increased significantly in recent
years – from $385 million in 2007/08 to $649 million in 2011/12 (a 69% increase). The
1982
number of students receiving an allowance has also increased, particularly since 2009,
due to policy changes implemented by the previous government (such as increases to
the parental income threshold) and the effects of the recession, including higher tertiary
enrolments due to increased unemployment.
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17. Student allowances are not well targeted to those in most need. Policy changes to the
parental income threshold mean that the original intent of allowances as a mechanism
to support students from low income backgrounds has broadened to include middle
income families.
18. In Budget 2012, we made changes to the Student Allowances Scheme to begin shifting
the focus of support back to students from lower income backgrounds by freezing
student allowances parental income thresholds. We also tightened the targeting of the
scheme so that it centres more on students in their initial years of study by removing
eligibility for postgraduate study and long programmes.
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19. There is room to improve the targeting of student allowances particularly for students
aged 24 and over. For students aged under 24, parental income testing provides a
useful targeting mechanism. For more mature single students, however, there is no
parallel test. Many New Zealanders for example, would be surprised to learn that
people can access student allowances for up to five years throughout their adult lives.
Student Loan Scheme
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20. Our analysis of the Student Loan Scheme has identified three broad types of borrower
groups that represent low value lending:
Borrowers whose labour market returns are insufficient to make progress in
the
repaying their loans (including borrowers under the repayment threshold,
borrowers with large student loans who have poor labour market outcomes, and
borrowers who use loans for non-educational purposes).
Borrowers who go overseas and do not repay (who may or may not have high
incomes).
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Borrowers who would still participate in tertiary education if the government
subsidy on student loans was reduced (for example, while lending to this group
may be high value, it may be unnecessary).
21. In addressing these areas, recent budgets have focused on:
encouraging educational performance and decision-making (e.g. introducing a
performance element to the scheme and a 7 EFTS life-time limit)
restricting areas of high risk lending (e.g. not lending to those in default for $500
or more in a year)
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shifting more of the costs of tertiary study to those who can afford to pay and who
are more likely to receive higher levels of private return from their study (e.g.
increasing the repayment rate from 10% to 12% and broadening the definition of
income for loan repayment purposes)
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improving contact with overseas-based borrowers (e.g. data-matching between
Inland Revenue and NZ Customs and requiring contact details from those wanting
to take advantage of the repayment holiday while they are overseas).
22. Prior to Budget 2010, the cost of lending was 47.39 cents in the dollar. The cost of
lending following Budget 2012 is 39.09 cents in the dollar.
23. The Government has also introduced the OBBCI to improve the level of repayments
and overall compliance of defaulting borrowers. This began as a small pilot in October
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2010 with a focus on borrowers in Australia, utilising private sector providers in a series
of tracing and collection studies as well as online advertising. The pilot proved
successful and achieved a return on investment of over $5 for every $1 spent within 9
months. The OBBCI has subsequently been scaled up and now also focuses on
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borrowers in the United Kingdom. Information-matching arrangements will be
introduced between Inland Revenue and Customs to identify borrowers in serious
default. Inland Revenue is also scoping the implementation of debt collection measures
in Canada and the United States, further legal activity, and engagement with online
payment intermediaries. The return on investment has now increased to over $10 for
every dollar spent. Additional funding to continue the OBBCI is being sought through
the Vote Revenue package.
24. Budget 2013 has assessed the scope for further improvements to the value of the loan
scheme to make further changes that do not significantly compromise the scheme’s
access objectives.
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Strategy for Budget 2013
25. In developing a student support package for Budget 2013, we have considered that:
the use of loans as a policy lever assumes that increased or more stable earnings
should result from study, and that credit market failure is the main reason some
people do not invest in study (i.e. people understand and are prepared to meet
the costs of study, they just do not have the financial means to meet them)
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tighter targeting of student allowances to those from low income families and to
the initial years of study means that future policy changes to reduce the cost of
the Student Loan Scheme need to retain relatively broad access to student loans.
the
26. Our focus, therefore, is to put in place initiatives that:
build on the success of the OBBCI programme in collecting repayments from
overseas-based borrowers (now and into the future) and increasing their personal
responsibility for debt repayment
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further redistribute tertiary education costs according to the benefits of study by
making changes to student allowances eligibility ahead of any further options for
reducing eligibility for loans.
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Budget 2013 package
27. The proposed Budget 2013 package aims to improve the value of student support
spending in the following ways:
Improving repayments from overseas-based borrowers and increasing personal responsibility for
debt repayment by:
extending the student loan and allowance stand-down period for permanent residents
(including Australians) from 2 years to 3 years from 1 January 2014
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putting in place an ongoing information-sharing agreement between Inland Revenue and
Internal Affairs to collect contact detail from passport applications
adjusting the overseas-based borrower repayment regime from 1 April 2014 for 2014/15
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and beyond, by introducing:
o
a fixed repayment obligation for overseas-based borrowers that is set at no less than
the borrower’s annual obligation from the time they become an overseas-based
borrower. If the borrower is already overseas, their repayment obligation will remain at
the rate they face at 1 April 2014
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additional repayment thresholds for overseas-based borrowers
making it an offence for a borrower to knowingly default on an overseas-based borrower
repayment obligation so that an arrest warrant can be requested to prevent the most non-
compliant borrowers from leaving the country from 1 July 2013.
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Targeting student allowances more tightly on the basis of returns to study and to initial years of
study by:
reducing the student allowance life-time limit for those aged 40 and over from 200 weeks to
80 weeks from 1 January 2014 (variant: reducing entitlement for those aged 40 and over
from 200 weeks to 120 weeks)
removing student allowances eligibility for those aged 65 years and over from 1 January
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2014.
28. The student support package also includes the following initiatives:
the
Changing the way the cost of lending is calculated in the Student Loan Scheme,
by linking the calculation to prevailing interest rates. This initiative will bring the
calculation into alignment with accounting standards. The savings that result from
this change will begin in the 2012/13 financial year.
Administrative funding to enable StudyLink to administer recent changes related
to level 1 and 2 Student Achievement Component provision agreed to by Cabinet
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last year whereby a student undertaking fees-free study cannot access the fee
component of a student loan and under 18 enrolled in fees-free places are
ineligible to borrow through the Student Loan Scheme [CAB Min (12) 21/5A
refers].
Improving repayments from overseas-based borrowers
29. Overseas-based borrowers have much lower repayment compliance and slower
repayment times than New Zealand–based borrowers3. Under current valuation
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assumptions, if all overseas-based borrowers were compliant (still allowing for death
and bankruptcy write-offs), the value of new lending would increase by 3 cents in the
dollar.
3 The higher domestic compliance is largely due to compulsory collection through the income tax system and
sanctions which are more easily enforced when non-compliance occurs.
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30. As at 30 June 2012, there were 701,232 borrower accounts held by Inland Revenue. Of
these borrowers, 101,095 (14%) of these borrowers were overseas-based. However,
these borrowers represented 58% of all borrowers with overdue payments (53,471) and
had 80% of all overdue repayments ($409.7 million).
Table 1: Overdue student loan repayments at 30 June
Overdue
2011
2012
%
Repayments
million
$million
change
Borrowers based
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-in New Zealand
$122.8
$102.6
-16.4%
-overseas
$288.9
$409.7
41.8%
Total
$411.7
$512.3
24.5%
__________________ _______ ________ __________
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Number of borrowers
-in New Zealand
49,803
38,577
-22.5%
-overseas
50,264
53,471
6.4
Total
100,067
92,048
-8.0%
Source: Student Loan Scheme Report, 2012
31. The number of overseas-based borrowers going into default continues to increase, with
the amount in default held by borrowers overseas having risen to $423 million by 31
January 2013. The previous three-year repayment holiday acted to mask the extent of
the problem of non-compliance of overseas-based borrowers.
32. The high level of default is primarily due to a significant portion of borrowers not
meeting their obligations of keeping Inland Revenue up to date with their contact details
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and making payments. Evidence to date from the OBBCI reflects the importance of
maintaining contact with overseas-based borrowers. Inland Revenue has had a 70%
compliance rate among borrowers it has contacted as part of this initiative. Up until
February 2013, the total cash collected from this initiative is $51.1 million and the costs
of the programme are $5 million. This means we have achieved a return on our
investment of $10.20 for every dollar spent.
Tightening student loan and allowances eligibility criteria for permanent residents
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33. Ministry of Education research indicates that permanent residents and Australians are
more likely to go overseas than New Zealand citizens and are less likely to return4.
While non-citizens who remain in New Zealand after study represent good value
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investment and lending for the Government, those who go overseas are more likely to
default on their student loans than borrowers who are New Zealand citizens. Our data
shows that, as at 31 March 2011, of the proportion of overseas-based borrowers who
were in default, 29.3% were Australian citizens, 14.5% were Chinese citizens and
12.6% were New Zealand citizens.
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34. To increase our confidence that permanent residents will stay in New Zealand after
study and make a contribution to our economy and society, we propose extending the
student loan and student allowance stand-down period for permanent residents
(including Australians) from 2 years to 3 years from 1 January 2014. This means that
migrants will need to have lived in New Zealand for at least three years, be ordinarily
resident in New Zealand, and have been entitled to reside indefinitely in New Zealand
for at least three years before they can receive a student loan and/or student
allowance.
35. We believe that this is a reasonable way of distinguishing which permanent residents
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intend to stay in New Zealand and which intend to leave. While this initiative places a
restriction on access to student support, it does not treat permanent residents any
differently from other students once they become eligible.
4 Smyth, R and Spackman, D (2012) Going Abroad. Wellington: Ministry of Education.
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36. We propose that a transitional arrangement be put in place in 2014 for permanent
residents who would have been eligible for student support under the existing 2 year
stand-down policy in 2014.
37. However, a consequence of this proposal is that it would move student support policy
out of alignment with the benefit system and this is an issue that may be raised.
However, tertiary study is a choice for individuals, one they will gain benefit from when
they finish study, whereas people may be on the benefit system for reasons that are
beyond their control.
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38. This change will bring our practice into line with that in the United Kingdom, where there
is a three-year stand-down for permanent residents. Stand-down requirements for
permanent residents in other countries vary. For example, in Australia all students must
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be Australian citizens in order to access their loan scheme. The exception to this is
South Australia, where permanent residents are required to reside in Australia while
they are studying in order to remain eligible for a student loan. In Canada and the
United States there is no stand-down requirement for student support for permanent
residents.
Information sharing agreement between Inland Revenue and Internal Affairs
39. We are seeking Cabinet’s approval in this paper to put in place an ongoing information
sharing agreement between Inland Revenue and Internal Affairs. The aim of this
agreement is to collect quality contact details for overseas-based borrowers to support
the prevention and collection of student loan default. We also plan to use this
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information-sharing match to collect contact details for liable parents living overseas
who have child support obligations.
40. The process does not require any substantial systems development or testing. Inland
Revenue and Internal Affairs are working with the Office of the Privacy Commissioner
to develop an appropriate sharing arrangement. An Order in Council under Part 9A of
the Privacy Act 1993 will be required to approve the new information sharing
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agreement. This process will require public consultation with relevant sector groups.
Adjusting the overseas-based borrower repayment regime
41. Currently, there is a three-stepped repayment regime for overseas-based borrowers
the
based on their loan balance, while those in New Zealand are income-contingent (see
Table 2). Unless they are on a repayment holiday, overseas-based borrowers are
required to make repayments every six months, in September and March. Interest is
charged from the day the borrower leaves New Zealand.
Table 2: Current overseas-based borrower repayment obligations
under
Loan Balance
Amount due per year
<= $1,000
The whole balance
>$1,000 and <= $15,000
$1,000
>$15,000 and <= $30,000
$2,000
>$30,000
$3,000
42. The current overseas-based borrower regime aims to strike a balance between a
borrower’s ability to repay and timely repayment of student loans. For borrowers who
are compliant with their student loan obligations, Inland Revenue currently
automatically reduces their repayments based on their loan balance.
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43. However, for about 14% of overseas-based borrowers (i.e. those who have a student
loan balance over $50,847), the amount due per year will not exceed the interest
charged on their loan. These 14,581 borrowers will continue to see their student loan
balance increasing even if they are compliant.
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44. We propose to make changes to the thresholds and repayment obligations of overseas-
based borrowers to speed up repayments for compliant borrowers. These changes do
not generate savings in the short term but will improve the sustainability of the Student
Loan Scheme over the longer term. This regime has not been reviewed since they were
set up in 2007. These changes would apply from 1 April 2014 for the 2014/15 tax year
and beyond.
45. Our proposals are to:
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a. add two additional steps to the current overseas-based repayment regime with larger
amounts due per year as set out in Table 3. This would ensure that a larger
proportion of compliant borrowers make payments that at least cover the interest on
their student loans. The new policy will reduce the proportion of borrowers who
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would not cover their interest were they compliant with their obligations from 14%
(potentially up to 14,581 borrowers) to 3.5% (potentially up to 3,758 borrowers).
Table 3: Proposed repayment obligations for overseas-based borrowers
Loan Balance
Amount due per year
<= $1,000
The whole balance
>$1,000 and <= $15,000
$1,000
>$15,000 and <= $30,000
$2,000
>$30,000 and <= $45,000
$3,000
>$45,000 and <= $60,000
$4,000
>$60,000
$5,000
b. introduce a fixed repayment obligation for overseas-based borrowers that is set at no
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less than their annual obligation from the time they become an overseas-based
borrower. If they are already overseas, their repayment obligation will remain at the
rate they face at 1 April 2014. This repayment obligation will remain until their loan is
repaid. Commercial loans operate on the same basis.
46. Table 4 sets out a comparison of minimum and average wage rates between countries
to provide an indication of the repayment obligation as a percentage of income. These
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percentages are calculated by dividing the actual repayment obligation by the total
income of the borrower. The median loan balance of an overseas borrower is $19,300.
Under the proposed regime, a borrower moving to Australia with a $20,000 loan
balance and earning the minimum wage will face a repayment rate of 5.14%. If they are
the
earning the Australian average wage then their repayment rate will drop to 2.88% as
the income of the borrower would be higher. If the borrower were in New Zealand
earning the equivalent of the Australian minimum wage, their effective repayment rate
would be 6.11% (i.e.12 cents on every dollar earned over $19,084).
Table 4: Repayment as a percentage of income
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Loan Balance
Australian
Australian
UK
minimum UK
average
minimum wage
average wage
wage
wage
$20,000
5.14%
2.88%
8.55%
4.14%
$30,000
7.71%
4.32%
12.82%
6.22%
$45,000
10.28%
5.76%
17.09%
8.30%
$60,000
12.85%
7.2%
21.37%
10.37%
NZBB - same income 6.11%
8.7%
2.21%
7.25%
(Source: Inland Revenue)
47. The proposed regime would increase the repayment obligations for overseas borrowers
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in default (see paragraph 30 for current details of these borrowers) and therefore
increase the amount of their default unless they start to comply. There may also be
some previously compliant borrowers with balances greater than $45,000 who stop
repaying or repay less than their obligation because of the higher rate. If the current
compliance rate of overseas borrowers does not change, borrowers in default will owe
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an additional $19 million by 2015 excluding any penalties that may be applied to
overdue amounts if they continue to default.
48. We want to see greater equity between the obligations of those who stay in New
Zealand and those who go overseas. While one short-term consequence of increasing
the repayment obligations for overseas borrowers will be growth in the amount in
default (because of late payment interest), it is not fair to relax obligations on non-
compliant overseas based borrowers while New Zealand based borrowers pay off their
loans – as occurred in the past with the amnesties on overseas borrowers. The
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purpose of the OBBCI is to manage the problem on non-compliance in an equitable
way. That initiative is already making progress collecting from non-compliant
borrowers. Eventually, we expect the OBBCI to start reducing the rate of growth of
overseas-based borrower debt.
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A sanction for the most non-compliant
49. In conjunction with adjusting the overseas-based borrower repayment regime, we are
proposing to introduce a new sanction targeting the most non-compliant overseas-
based borrowers. There are risks and costs associated with this initiative but on
balance we consider that the sanction will be a well-targeted intervention and well
placed in our overall package of measures designed to increase overseas-based
borrower’s responsibility for making student loan repayments.
50. Under the Child Support Act, Inland Revenue can request the District Court to issue an
arrest warrant for a liable parent who is about to leave New Zealand with the intent to
avoid their obligations. This power is supported by an information match with the New
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Zealand Customs Service which notifies Inland Revenue when serious defaulters return
to New Zealand and what their contact details are. Inland Revenue will then contact
the defaulter to negotiate repayment, and if the liable parent refuses to comply and is
about to leave the country, a warrant for their arrest can be requested.
51. Introducing similar provisions to the Student Loan Scheme Act would send a clear
message to all borrowers that non-compliance is unacceptable and that there are real
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consequences for ignoring repayment responsibilities. This is a targeted measure that
could be applied to the worst cases of default while deterring the wider group of
borrowers from not complying. This new sanction would be supported by a
communications campaign to ensure that borrowers understood the potential
the
consequences of non-compliance.
52. Amendments to the Student Loan Scheme Act would be made to make it a criminal
offence to knowingly default on an overseas-based borrower repayment obligation.
This is a necessary provision as an arrest warrant is usually only requested in
connection with a suspected criminal offence. In the event of a successful conviction a
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fine of no more than $2,000 would be an appropriate penalty in line with other minor
offences such as disorderly behaviour or wilful damage.
53. In practice the existing Child Support power is used very sparingly. Over the past four
years, only 69 cases have been referred to the child support legal team to be
considered for an arrest warrant application. This referral alone resulted in 44 of the
referred liable parents making payments without a warrant being requested. Of the 25
remaining arrest warrant requests (one of which was declined by the Court), only 13
were executed as the other 12 liable parents came to an arrangement.
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54. We believe very few defaulters would risk arrest for the sake of avoiding their
obligations. While student loan obligations are a financial burden that some borrowers
may wish to avoid, the factors that can motivate entrenched child support default (i.e.
custody and marital disputes) are not present in a student loan context.
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55. For the small number of borrowers who remain non-compliant once the arrest warrant
has been issued, Inland Revenue would request information from airlines under section
17 of the Tax Administration Act to determine which flight a borrower is booked on.
This information would be provided to Police stationed at the airport who would have to
locate the defaulter before they boarded their flight. Police have advised that as this
would have to be achieved without photos, often in large crowded areas, this could be
difficult and time consuming.
56. Once the borrower is located at the airport Police would make a judgement as to
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whether to execute the arrest warrant or not. It is important for Police to use their
discretion and the decision to make an arrest may have consequences for other
passengers, the airline and airport security. It may not be appropriate, for example, to
arrest a single adult accompanying a young child if adequate arrangements cannot be
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made for the child. If the borrower’s bags have already been loaded then the
consequences of delaying the flight would be taken into account. It is proper that
Police make these decisions as they are in the best position to assess the potential
impacts of an arrest.
57. This proposal may have the appearance of the Police acting as debt collection agents
for Inland Revenue. If enacted it would be made clear that police would only act as
independent officers of court and execution of these arrest warrants would remain at
constabulary discretion.
58. This proposal would have cost implications for Courts and while the number of expected
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arrest warrant requests is low the exact number is unknown and the costs to Courts
have not been estimated.
59. Legislative amendments would be required for this initiative. The sanction could apply
from 1 July 2013 which would allow defaulting borrowers who had already made travel
plans time to contact Inland Revenue and address their situation.
Targeting student allowances more tightly on the basis of returns to study and initial
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years of study
60. While there are social benefits of having an educated older population (e.g. working
the
longer, volunteer work or community involvement), the return on the Government’s
investment in a person’s tertiary education is much less if they only have a few years
left in the workforce. This is evident in our analysis of the Student Loan Scheme which
has identified high cost loans as being strongly associated with those being over 50, a
non-New Zealand citizen, and studying below degree level.
61. In the Student Allowances Scheme, between the ages of 30 and 54, there is a steady
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proportion of approximately 22% permanent residents. However, at the age of 55, this
increases steeply to 30.8%, 45.6% by age 60, and 82.3% by age 65. There are several
reasons why permanent residents might be over-represented at older ages. For
example, they could be accessing the allowance as an alternative to other forms of
living support5 or they could be pursuing studies and accessing opportunities not
previously available to them.
62. This trend is mirrored by a significant variation among the proportion of Asian recipients
which increases sharply at age 55 (rising from 25.8% of 50 – 54 year olds to 39.8%).
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By age 65, the Asian population is significantly over-represented in the Student
Allowances Scheme, making up 84% of all recipients 65 years and over (compared to
5 For example, to qualify for NZ Superannuation, a person must be 65 years or older and have lived in New
Zealand for at least 10 years since they turned 20. Five of those years must be since they turned 50.
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an average of 22.7%). There is also an increase in study at secondary schools,
wānanga, and Private Training Establishments and a decrease in study at universities
after age 55.
63. Study undertaken by these students is unlikely to have significant economic benefits for
New Zealand, as these people are unlikely to enter the labour market. Social benefits
(for example improving English language skills) could be achieved through part-time
study (not eligible for an allowance) or adult and community education.
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64. To target student allowances more tightly on the basis of returns to study and for initial
years of study we are proposing to:
reduce student allowance entitlement for those aged 40 and over from a
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maximum of 200 weeks to a maximum of 80 weeks from study starting on or after
1 January 2014 (or the variant of for those aged 40 and over to a maximum of 120
weeks)
remove student allowance eligibility for those aged 65 and over (the age would be
linked to the eligibility age for New Zealand Superannuation) for study starting
from 1 January 2014.
65. Lifetime limits can be used as a rough proxy for existing qualifications, or the amount of
prior education for which a person has already received support. Reducing entitlement
for people aged 40 and over to a maximum of 80 weeks (or a variant of 120 weeks)
would reduce spending on students who have already had the opportunity to gain an
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initial qualification while still providing a pathway for people who may require upskilling
to support themselves. An 80 week entitlement would continue to support those who
may have missed out on foundation level education. A maximum of 80 weeks would
generally enable a person to complete 2 years of study including most foundation level
study, certificates and diplomas.6 The 120 week variant option would provide around 3
years’ worth of allowance, which would support a person for the duration of most
undergraduate Bachelor’s degrees. Very few people currently use more than 120
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weeks of allowance (approximately 8% of recipients aged 40 and over), as such, the
savings under the 120 week variant may be up to 60% lower than the savings of the 80
week option.
the
66. These changes will create a tiered system of entitlement which decreases as people
age. Younger students will receive 5 years of support to recognise they are unlikely to
have had income of their own and to support students from low income families whose
parental incomes are not enough to support them through study. Older learners will
continue to receive 2 years of support (or 3 years under the 120 week variant) to allow
them to retrain or upskill. Both options will ensure those who have not had the
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opportunity to gain foundation level qualifications will still have access to student
allowance for study. For programmes of study that take longer to complete than the
new reduced limit, students will have the interest-free student loan scheme available to
them, including living costs (for people aged under 55).
Changes to the calculation of the cost of lending in the Student Loan Scheme
67. As part of the greater level of scrutiny of the loan scheme, we have reviewed some
aspects of the accounting for loans. As a result we propose to shift the calculation of
the cost of lending in the Student Loan Scheme to a ‘year of lending’ basis.
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6Currently 10% of all student allowance recipients are aged 40 and over; of these 80% are using fewer than 80
weeks of allowance and 92% are using fewer than 120 weeks of allowance. In 2012 over 60% of recipients over
age 40 were studying at sub-degree level (compared to only 37% of allowance recipients aged under 40).
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68. The current approach to the calculation is a proxy for the true cost of the scheme and is
not strictly correct in terms of the accounting standard. The cost of lending is set for
each borrower in the scheme, taking account of the interest rate in the year the
borrower first entered the scheme, even if the borrower draws from the scheme in
subsequent years.
69. This borrower-based method has been used because:
it is a good proxy for the true cost if interest rates are relatively stable. But the
Treasury’s long
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-term forecasts of interest rates have been much lower since 2011
than in previous years. This means that the borrower-based method is a poorer
proxy now than it has been in the past.
it was not possible to calculate the cost of lending in the correct way when the
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current accounting standards were first applied in 2006. Changes in the
administration of student loans that took effect in 2012 have made it possible to
account for the cost of Student Loan Scheme lending on a ‘year of lending basis’
which is more accurate and in line with accounting standards.
70. We therefore consider that it is timely to change the calculation of the cost of lending
according to when the borrowing occurs. This is consistent with the accounting
standard which assumes that the cost of each year’s lending wil take account of the
interest rates that applied in the year of lending. It is a better reflection of the true cost
and if we understate or overstate the cost of lending, this will distort decision-making in
the tertiary education portfolio and lead to misallocation of resources. The new method
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does carry the risk of greater sensitivity to changes in interest rates, because changes
will be reflected in the cost of lending on an annual basis, rather than being spread over
a number of years.
71. Following consideration by ourselves and the Minister of Finance, we directed the
Ministry of Education and Inland Revenue to work with accounting specialists and the
scheme valuers and auditors on implementing the change. We intend to implement the
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new approach with effect from 1 January 2013.
72. The savings of this change have returned to the centre through the March Baseline
Update which is consistent with how technical changes are treated in other areas.
the
Further information on the treatment of these savings is set out in the accompanying
paper
Tertiary Education Package for Budget 2013.
Funding to put in place changes to loan eligibility for entry-level education
73. Last year Cabinet agreed to a range of changes to level 1 and 2 Student Achievement
under
Component provision to improve the relevance and results of entry-level tertiary
education [CAB Min (12) 21/5A refers]. These changes included making an increasing
percentage of places fees-free (thereby removing access to the fee component of a
student loan) and restricting students aged under 18 years of age enrolled in the fees-
free provision from borrowing from any component of the Student Loan Scheme.
74. This policy change requires changes to StudyLink’s system before they can be
implemented and StudyLink advice is that it is unable to meet these costs out of its
baseline. There are also ongoing operating costs for StudyLink to contact the provider
or student when a person is studying toward a fees-free level 1 or 2 qualification and a
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higher level qualification at the same provider.
75. Joint Ministers have already agreed to make a contribution towards the cost of
implementing these decisions in 2012/13. We, along with the Ministers of Finance and
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Social Development, agreed to transfer $114,000 that was identified as savings from
the He Toki initiative to StudyLink [METIS 713828 refers].
76. StudyLink requires an additional $0.792 million over the next 5 years ($0.522 million
over the 2013/4 - 2016/17 Budget period) to deliver these policy changes.
Impact of the package
77. The main benefits and risks of our Budget 2013 proposals are set out in Appendix A.
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The risks and benefits have been identified in respect of:
impacts on access to tertiary education
likelihood of potential policy savings for reprioritisation
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fit with student support objectives and wider government objectives
Human Rights Act and other legal implications
public perception issues
administrative complexity and cost.
78. Appendix A does not include analysis of the proposal to change how the cost of lending
is calculated as this analysis is provided in the main body of this paper. This appendix
also does not include analysis of changes to loan eligibility for entry-level tertiary
education for which additional funding is sought. This policy was agreed to by Cabinet
last year [CAB Min (12) 21/5A refers].
Information
79. The major impacts of the package7 as a whole are that it:
reduces the student loan write-down from 39.09 cents in the dollar to 34.92 cents
in the dollar (which includes a reduction to 34.89 cents in the dollar from the
student support package and an increase of 0.03 cents in the dollar from the
tertiary education package) Official
reduces the repayment times for the almost 30,000 overseas-based student loan
borrowers who have loan balances above $15,000, providing they comply with
their obligations
the
on average, removes student allowances eligibility for approximately 2,860
students a year and reduces the cost of student allowances by $61.807 million
over four years (2013/14 to 2016/17).
Transition arrangements
under
80. We are putting in place generous transition arrangements for some of the policy
changes we are making that will provide temporary support in 2014 for those who will
be most immediately affected by them.
81. For the student allowance initiatives that reduce the lifetime limit to 80 weeks (or 120
weeks) for those aged 40 or over and remove eligibility for those aged 65 or over, those
studying this year with a student allowance will be able to continue receiving an
allowance.
82. Permanent residents who would have been eligible for student support under the
current two year stand-down policy will be able to access student support at the date at
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which they would have become eligible. This policy takes full effect from 1 January
2015.
7 This includes the option to reduce student allowance entitlement for those aged 40 and over from 200 weeks to
80 weeks. The 120 week variant is yet to be costed but is likely to reduce the savings of this initiative by as much
as 60%.
14
Financial implications
83. The tables below set out current estimates of the financial implications of the changes
to student support. These estimates incorporate the administration costs of the
initiatives and benefit flow-ons.
84. These estimates take into account interaction effects of the policies but are still subject
to further refinement.
Table 5: Indicative operating impact of the student support package
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Operating impact ($ million)
2016/17 4 year total
& out-
(2013/14
Act
Initiatives
2012/13
2013/14
2014/15
2015/16
years
to 2016/17)
3 year loans and allowances
stand-down for permanent
residents
-
0.380
(2.425)
(7.036)
(9.608)
(18.689)
Fixed repayment regime for
overseas-based borrowers
-
1.601
-
-
-
1.601
Additional repayment thresholds
for overseas-based borrowers
-
1.640
-
-
-
1.640
Border restrictions for overseas-
based borrowers
-
0.600
-
-
-
0.600
Remove allowance eligibility for
those aged 65 and over
-
(0.135)
(1.889)
(2.837)
(3.107)
(7.968)
Information
Reduce allowances eligibility for
those aged 40 and over to 80
wks (see paragraph 86)
-
(1.713)
(6.901)
(9.485)
(9.396)
(27.495)
Changes in the cost of lending8
(41.900)
(33.900)
(18.000)
(7.400)
(0.800)
(60.100)
Funding to deliver changes to
loan eligibility for entry-level
education
0.082
0.448
0.130
0.132
0.132
0.842
Official
Total operating impact
(41.818)
(31.079)
(29.085)
(26.626)
(22.779)
(109.569)
85. The indicative four year (2013/14 to 2016/17) operating impact of the student support
the
package is estimated to be a saving of $109.569 million.
86. The variant to reduce student allowance entitlement for those aged 40 and over from
200 weeks to 120 weeks has not been costed in detail. However, it is likely to result in
a reduction of savings of as much as 60% for this student allowance initiative.
Table 6: Indicative debt impact of the student support package
under
Debt impact ($ million)
2016/17 4 year total
& out-
(2013/14
Initiatives
2012/13
2013/14
2014/15
2015/16
years
to 2016/17)
3 year student loans and allowances
stand-down for permanent residents
-
0.000
(1.519)
(7.201)
(11.509)
(20.229)
Reduce allowances eligibility for
those aged 40 and over to 80 wks
-
1.307
3.997
5.004
4.232
14.540
Remove allowance eligibility for
those aged 65 and over
-
(0.130)
(0.444)
(0.546)
(0.627)
(1.747)
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Total debt impact
-
1.177
2.034
(2.743)
(7.904)
(7.436)
8 These savings will be returning to the centre through the March Baseline Update.
15
87. The indicative four year (2013/14 to 2016/17) debt impact of the student support
package is estimated to be a saving of $7.436 million.
Administrative implications of the student support package
88. The proposals will have administrative implications for the Ministry of Social
Development (StudyLink) and Inland Revenue.
Inland Revenue costs
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89. Inland Revenue has requested permanent funding for the Overseas-based Borrower
Initiative (OBBCI) as part of Vote Revenue for Budget 2013. The OBBCI has seen large
initial success, the initiative has had a rate of return of over $10 for every dollar. There
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are still a number of additional OBBCI initiatives that have yet to be fully implemented,
such as the tracing and collection by private sector agencies in Australia and the United
Kingdom and the information match with the Department of Internal Affairs. To ensure
the OBBCI meets its objective of bringing overseas borrower debt under control the
initiative needs to be fully implemented and continue for some time beyond its current
funding.
90. If this permanent funding for the OBBCI is approved, Inland Revenue will not request
any further funding for the information sharing agreement with DIA or to implement
border restrictions (excluding a communications strategy).
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91. The initiatives have been costed on a marginal basis according to Inland Revenue’s
initial assessment of implementing this solution. The indicative administrative costs are
dependent on the proposal development and final decisions on the legislation. Inland
Revenue is managing significant fiscal and resource pressures over the short to
medium term against a backdrop of increasing customer expectations, a
comprehensive legislative change programme and our proposed transformational
agenda.
Official
92. Additional funding will be sought for:
the costs of a communication strategy that we recommend as essential to the
effectiveness of border restrictions
the
adjusting the overseas-based borrower repayment regime from 1 April 2014 for
2014/15 and beyond, by introducing a fixed repayment obligation and additional
repayment
thresholds
for
overseas-based
borrowers,
and
associated
communications costs to inform borrowers of these changes.
under
93. The total funding request is $3.841 million for the 2013/14 fiscal year. Inland Revenue
will absorb the costs of $0.336 million incurred in the 2012/13 fiscal year for these
policies as well as the continued costs of delivering for the fiscal years 2014/15
onwards.
94. The indicative administration costs implications on Inland Revenue are shown in the
following table.
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16
Table 7: Indicative administrative costs for Inland Revenue
Operating impact ($ million)
2016/17
& out-
4 Year
Initiative
2012/13
2013/14
2014/15
2015/16
years
Total
Additional repayment
thresholds for overseas-
based borrowers
0
1.640
0
0
0
1.640
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Fixed repayment regime for
overseas-based borrowers
0
1.601
0
0
0
1.601
Border restrictions for
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overseas-based borrowers
0
0.600
0
0
0
0.600
Total costs
0
3.841
0
0
0
3.841
Inland Revenue comment
95. Staff resources have been anticipated for the delivery of the Budget 2013 initiatives that
Inland Revenue will implement. Those resources will be applied to the wider tax policy
initiatives in Budget 2013, not only student loans. Whether those resources are
sufficient will depend upon the significance, in particular the systems requirements, of
the overall Budget 2013 package. If the total resource requirements of a proposed
package exceed those anticipated, Ministers will need to weigh the trade-offs of either
Information
reducing the scope of the package or shifting resources from projects already on Inland
Revenue’s work plan.
Ministry of Social Development costs
96. The Ministry of Social Development is seeking the following funding for implementing
the student allowances initiatives: Official
Table 8: Indicative administrative costs for the Ministry of Social Development
Operating impact ($ million)
the
4 year
Total
2016/17
(2013/14
Cost
& out-
to
Initiative
Type
2012/13 2013/14
2014/15
2015/16
years
2016/17)
Remove allowances for
Set-up
-
0.340
-
-
-
0.340
under
those aged 65 and over
Ongoing
-
-
-
-
-
-
Reduce allowances
eligibility for those 40 and
Set-Up
-
0.460
-
-
-
0.460
over to 80 weeks9
Ongoing
-
-
0.068
0.077
0.081
0.226
3 year student loan and
allowance stand-down for
Set-up
-
0.380
-
-
-
0.380
permanent residents
Ongoing
-
-
-
-
-
-
Funding to put in place
changes to loan eligibility
Set-up
-
0.320
-
-
-
0.320
for entry-level education
Ongoing
0.082
0.128
0.130
0.132
0.132
0.522
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Total costs
0.082
1.628
0.198
0.209
0.213
2.248
9 The administration costs for the 120 week variant have not been estimated but are likely to slightly
reduce the ongoing costs.
17
Ministry of Social Development (StudyLink) comment
97. StudyLink cannot absorb within existing baseline funding all of the costs associated with
the policy changed proposed in this paper. The funding StudyLink is seeking represents
the additional costs that cannot be absorbed but are necessary to cover the additional
work and new system functionality required to successfully deliver the proposed
eligibility and entitlement changes.
98. StudyLink’s experience with eligibility changes made as part of the 2012 Budget has
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highlighted the importance of proactive and detailed communication of eligibility
changes with clients and stakeholders. Once final decisions are made, work will
commence on the development of a communication strategy.
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Consultation
99. The Ministry of Social Development, the Treasury, Inland Revenue, and the Department
of Prime Minister and Cabinet have been consulted in the development of this paper.
100. The Ministry of Justice has been consulted on the student allowances proposals and
the arrest warrant proposal. The New Zealand Police and New Zealand Customs
Service have also been consulted on the arrest warrant proposal. The Department of
Internal Affairs and the Office of the Privacy Commissioner have been consulted on the
proposal for the information sharing agreement between Inland Revenue and the
Department of Internal Affairs.
Information
New Zealand Police comment
101. Police has concerns about the operational and reputational impacts on Police resulting
from execution of warrants via border alerts.
102. Police currently has around 37,000 warrants to arrest outstanding, relating to around
15,000 individuals. Given this large volume, warrants for arrest are prioritised.
Official
Execution of student loan warrants would be unlikely to gain a high priority except in
instances where mechanisms such as border alerts are used.
the
103. However, current border alert processes create operational issues for Police. As the
departing traveller cannot be detained at Customs, Police would have to find the
traveller in the airport departure lounge before they can board their flight. As the
departure lounge can be large and crowded finding passengers can be difficult and
time consuming, especially as Police typically do not have aids such as photographs to
assist them with such identification.
under
104. Use of departure alerts can also have cost implications for airlines. Civil aviation
security rules require that a passenger does not board their flight, their baggage must
be removed before the flight departs. This can cause delays for the flight with
significant resulting costs to the airline. Police note that no cost benefit analysis,
including the impact on third parties such as airports, has been conducted.
105. As noted in paragraph 56, where airport police intercept a defaulter before they board
their flight, airport police would retain discretion as to whether the warrant should be
executed. The situation, where airport police have to make decisions as to whether to
stop travel, balancing competing interests and in tight timeframes, increases the risk
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that the passenger will be allowed to fly.
106. If the proposal is agreed, Police recommend that the border alert processes generally
be reviewed to ensure that the system is robust and efficient. Police will consult with
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border agencies and provide Ministers advice on how to improve the border alert
system to reduce inefficiency.
Treasury comment
Changes to the calculation of the cost of lending in the Student Loan Scheme
107. Treasury supports the change to calculating the cost of lending in the Student Loan
Scheme. The new approach, which uses annual interest rate data for each borrowing
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cohort to calculate the Effective Interest Rate for the loan scheme, will increase
accuracy of the scheme and will provide the Government with better information on the
cost of lending.
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108. The change is fiscally neutral over the long-run because while there are significant
savings in the short run the change in the interest unwind leads to comparable costs
which eventually offset these short-term savings. Treasury therefore recommends
committing only 50% of the savings (i.e. $10.200 million per annum) over the forecast
period to achieve a balanced budget package for Tertiary Education. The remaining
savings would therefore be available to manage cost pressures in future outyears.
Adjusting the overseas-based borrower repayment regime
109. Treasury is concerned that the proposed changes to the overseas-based borrower
repayment regime will not improve the sustainability of the Student Loan Scheme over
the longer term (in contrast to the stated rationale in paragraphs 4c/44].
Information
110. Given that 53,471 overseas-based borrowers had overdue student loan repayments at
30 June 2012, Treasury’s primary concern is that increasing these obligations will
accelerate the growth of the level of default amongst overseas-based borrowers. This is
already a significant issue, with the overall level of default having risen to $421 million
by 31 December 2012, and rising by approximately $2 million per month (see
paragraph 30 and Table 1).
Official
111. Non-compliant borrowers already have large loan balances that grow quickly with
successive late payment penalties and compound interest. As a result, increasing the
repayment rates will accelerate the rate of growth of the overall level of overseas-based
the
borrower debt, as well as the amount that is in default. Officials have also stated that
they do not expect the faster recovery of loans from compliant borrowers under this
proposal to generate any savings in the short term (see paragraph 44).
112. Consequently, Treasury is concerned that the primary consequence of increasing the
repayment rates for overseas-based borrowers will be to increase the already
significant levels of outstanding overseas-based borrower debt. This may also
under
undermine continuing efforts to improve compliance amongst these borrowers.
113. Allowing for these concerns, Treasury does acknowledge that there is a specific
rationale for introducing additional thresholds for overseas-based borrowers with very
large balances, as the rates that are currently paid by many of these borrowers are not
sufficient to service their interest payments.
114. However, the rationale for imposing a repayment rate floor based on the individual’s
loan balance at the time of leaving New Zealand is not clear. In particular, Treasury is
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concerned that this will lead to inequitable treatment of borrowers. For example, lower
income borrowers who may have larger loan balances but are otherwise identical to
other borrowers (e.g. in terms of educational attainment and time spent overseas) will
have their repayments fixed at a higher rate for time spent abroad.
19
Proposed changes to the Student Support Schemes
115. Our first best advice is that we support a broad-based tertiary system with a larger
element of private contribution to fund the direct costs of tertiary education. However,
given that Ministers have made it clear that certain measures (e.g. interest on Student
Loans) will not be considered, we recognise that the scope for future savings under
current policy settings is limited to the type of changes outlined in this package.
116. Ministers should be aware that these incremental changes while generating small
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savings are likely to have impacts on specific groups (refer Appendix A) by limiting their
access to tertiary education. For example, the savings initiatives proposed include
incremental changes to the eligibility to student support systems, based on age, and
immigration status that limit access to tertiary education.
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Human Rights implications
117. Removing access to student allowances for those aged 65, reducing the life-time
entitlement for those aged 40 to 80 weeks (or 120 weeks), and increasing the student
loan and allowances 2 year stand-down for permanent residents and Australians to 3
years raises prima facie issues of discrimination based on age and national origin
respectively.
118. Our legal advice is that, if these policies are challenged, it is likely that they will be found
by the courts not to amount to unlawful discrimination if evidence can be produced to
establish that these measures wil more likely than not achieve Government’s intended
Information
goals. Evidence-based justification arguments, including those set out in this paper, will
be required.
119. By itself, introducing the power to request an arrest warrant for a civil debt (even if it
targeted the most non-compliant borrowers) would be in conflict with sections 22
(liberty of the person), 18 (freedom of movement) and section 27 (right to justice) of the
New Zealand Bill of Rights Act 1990. The proposal in this paper introduces a new
Official
offence targeting borrowers who knowingly default on an overseas based borrower
repayment obligation. This shifts the matters from the civil to the criminal. The power to
request an arrest warrant would be consistent with other criminal proceedings.
the
Legislative implications
120. Amendments to the Student Loan Scheme Act 2011 will be required to introduce
changes to the overseas-based borrower repayment regime. The application date for
the new regime would be 1 April 2014.
under
121. Border restrictions require amendments to the Student Loan Scheme Act 2011 and also
require regulations to amend the District Court rules. The restrictions could apply from 1
July 2013.
122. These amendments could either be contained in a budget night bill or in a separate mid-
year bill that would need to be passed by 1 April 2014. Budget night legislation would
be required in order to meet the 1 July 2013 implementation date proposed for the
border restrictions.
123. Student allowance initiatives will require amendments to the Student Allowances
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Regulations 1998.
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Regulatory Impact Analysis
124. A regulatory impact analysis has been prepared for all proposals and this is included as
Appendix B. The Ministry of Education has reviewed the regulatory impact statement
and associated supporting material, and considers that the information and analysis
summarised in it meets the quality assurance criteria.
125. We have considered the analysis and advice of the Ministry of Education, as
summarised in the attached regulatory impact statement, and we are satisfied that,
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aside from the risks, uncertainties and caveats already noted in this Cabinet paper or in
the Regulatory Impact Statement, the regulatory proposals recommended in this paper
are consistent with our commitments in the government statement “Better Regulation,
Less Regulation.”
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Gender Implications
126. Overall, the eligibility proposals will affect more women than men because women are
more likely to participate in tertiary education. However, we expect that there will be
slightly more women affected by proposal to reduce the student allowance life-time limit
for those aged over 40. This is because more tertiary students over 40 are women,
compared to the overall student population.
Publicity
Information
127. A communications plan will be developed in consultation with agencies and Ministers’
offices prior to Budget 2013 announcements.
Recommendations
We recommend that Cabinet:
1.
note that a package of changes to the Student Loan Scheme and Student Allowances
Official
Scheme has been developed as part of Budget 2013 to improve the value of student
support spending by:
1.1 improving repayments from overseas-based borrowers and increasing personal
the
responsibility for debt repayment
1.2 targeting student allowances more tightly on the basis of returns to study
2.
note that this student support package enables us to achieve our tertiary education
priorities through Budget 2013, as set out in the accompanying Cabinet paper ‘
Tertiary
under
Education package for Budget 2013’
Improving repayments from overseas-based borrowers
3.
agree:
3.1 to extend the current student loan and student allowances stand-down period for
permanent residents and Australians from two years to three years from 1
January 2014, but continuing to exempt people who are refugees, protected
persons, or sponsored into New Zealand by a family member who is entitled to
reside indefinitely in New Zealand under refugee or protected persons policy
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3.2 to grand-parent permanent residents who would have become eligible for student
loans and allowances in 2014 under the existing 2 year stand-down policy. These
permanent residents will be able to access student loans and allowances from
the date they would have become eligible in 2014
21
4.
agree that an information-matching agreement be established between Inland Revenue
and Internal Affairs by 1 April 2014 to obtain contact information from the passport
renewal process, to identify non-compliant overseas-based borrowers and child support
debtors (subject to operational details and the outcome of discussions with the Office of
the Privacy Commissioner)
5.
agree to introduce a fixed repayment obligation for overseas-based borrowers that is set
at no less than their annual obligation from the time they become an overseas-based
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borrower. If the borrower is already overseas, their repayment obligation will be set at
the rate they face at 1 April 2014
6.
agree to introduce two additional repayment thresholds for overseas-based borrowers
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with larger student loans from 1 April 2014 which will result in the following overseas-
based borrower regime:
Loan Balance
Amount due per year
<= $1,000
The whole balance
>$1,000 and <= $15,000
$1,000
>$15,000 and <= $30,000
$2,000
>$30,000 and <= $45,000
$3,000
>$45,000 and <= $60,000
$4,000
>$60,000
$5,000
7.
agree to make it an offence for a borrower to knowingly default on an overseas-based
Information
borrower repayment obligation so that an arrest warrant can be requested to prevent
the most non-compliant borrowers from leaving the country from 1 July 2013
8.
note that Inland Revenue is currently working through the policy details of arrest
warrants for the most non-compliant borrowers but that these are intended to mirror,
where appropriate, border controls already in place for child support debtors
9.
note that Police will consult with border agencies and provide Ministers advice on how
Official
to reduce inefficiency in the border alert system
Targeting student allowances to more tightly on the basis of returns to study and initial years
the
of study
10.
agree to introduce an upper age restriction for student allowances eligibility which is
linked to the age of eligibility for New Zealand Superannuation10, currently 65 years of
age, for study starting on or after 1 January 2014
11.
agree to:
under
EITHER
11.1 reduce the student allowances life-time limit for those aged 40 and over from a
maximum of 200 weeks to a maximum of 80 weeks for study starting on or after
1 January 2014
OR
11.2
reduce the student allowances life-time limit for those aged 40 and over from a
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maximum of 200 weeks to a maximum of 120 weeks for study starting on or
after 1 January 2014
10 This would mean that if the age for New Zealand Superannuation increases so too would the age at which
student allowance eligibility is removed.
22
12.
agree that those affected by recommendations 10 or 11 above:
12.1 who begin their student allowance application period in 2013 and this period
carries on into 2014, will be assessed under the 200-week limit for the period of
that application11
12.2 will continue to receive a student allowance up until 31 December 2014 or until
they reach the (previous) 200 week entitlement, whichever comes first, if they
received a student allowance in 2013
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Changes to the calculation of the cost of lending in the Student Loan Scheme
13.
note in consultation with the Minister of Finance and with the agreement of the loan
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scheme auditors, we have decided to change the basis of calculating the cost of lending
in the Student Loan Scheme
14.
note that the treatment of savings from this initiative is addressed in the accompanying
paper
Tertiary Education Package for Budget 2013
Putting in place changes to loan eligibility for entry-level tertiary education
15.
note that StudyLink are seeking administration costs of $0.082 million in 2012/13;
$0.448 million in 2013/14; $0.130 million in 2014/15; $0.132 million in 2015/16 and out-
years to deliver changes to loan eligibility for entry-level education agreed to by Cabinet
Information
last year [CAB Min (12) 21/5A refers]
Bill of Rights Act Implications
16.
note that, under the New Zealand Bill of Rights Act, recommendations 3, 10 and 11
raise prima facie discrimination issues and that these would not amount to unlawful
discrimination if evidence can be produced to establish that they are more likely than
not to achieve the Government’s intended goals
Official
17.
note that introducing the power to request an arrest warrant in relation to a new offence
under the Student Loan Scheme Act is consistent with other criminal proceedings under
the
the New Zealand Bill of Rights Act 1990
Legislative implications
18.
authorise the Minister for Tertiary Education, Skills and Employment and the Minister
of Revenue to make any technical policy decisions needed in the drafting process of the
necessary legislation or relevant regulations to give effect to the student loan proposals
under
in this paper
19.
authorise the Minister for Tertiary Education, Skills and Employment and the Minister
for Social Development to make any technical policy decisions needed in the drafting
process of the necessary legislation or relevant regulations to give effect to the student
allowance proposals in this paper
20.
agree that:
EITHER [required for a 1 July 2013 implementation of border restrictions]
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20.1 amendments to the Student Loan Scheme Act be contained in a Budget night
bill
11 An application period means an approved student allowance application for an approved enrolment period up
to a maximum of 52 weeks.
23
OR
20.2 amendments to the Student Loan Scheme Act be contained in a separate mid-
year bill that would need to be passed by 1 April 2014
21.
invite the Minister of Revenue to issue drafting instructions to the Parliamentary
Counsel Office:
21.1 for a Student Loan Scheme Amendment Bill or Bills to give effect to the student
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loan proposals in this paper
22.2 to prepare an Order in Council approving a new information sharing agreement
between the Department of Internal Affairs and Inland Revenue
Act
22.
invite the Minister for Social Development to instruct the Parliamentary Counsel Office
to draft amendments to the Student Allowances Regulations (1998) to give effect to the
changes to student allowances proposed in this report
Financial implications
23.
note that the financial implications of the package for the 2013/14 to 2016/17 financial
years are: $109.569 million in operating impact savings, with a debt impact saving of
$7.436 million12
24.
note that changes to appropriations, including Ministry of Social Development and
Information
Inland Revenue administration and IT costs, will be made as part of the tertiary
education package for Budget 2013
Administration costs
25.
note that Inland Revenue has requested permanent funding for the Overseas-based
Borrower Initiative (OBBCI) as part of Vote Revenue for Budget 2013 and that Inland
Official
Revenue will fund the information match for passport renewal contact information with
the Department of Internal Affairs and the implementation of the border restrictions
(excluding any communications costs) through the permanent OBBCI appropriation
the
26.
note that Inland Revenue will self-fund the costs of $0.350 million for the 2012/13
financial year as well as the continued costs of $0.110 million for administering the
border restrictions and increasing the repayment thresholds for overseas-based
borrowers for 2014/15 onwards
27.
note that Inland Revenue will be requesting funding of $3.841 million for 2013/14 for the
under
communications strategy for border restrictions and for implementing the increase in the
repayment thresholds for overseas-based borrowers
28.
note the indicative cost of administration costs for StudyLink of $2.248 million over four
years (2013/14 to 2016/17) to deliver the permanent resident stand-down extension for
student loans and allowances, the initiatives that reduce student allowances eligibility
for older people, and changes to student loan eligibility for entry-level education referred
to in recommendation 15 above
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12 This includes the option to reduce student allowance entitlement for those aged 40 and over from 200 weeks to
80 weeks. The 120 week variant is yet to be costed in detail but is likely to reduce the savings of this initiative by
as much as 60%.
24
Further decisions
29.
agree to delegate authority to the Minister of Finance and the Minister for Tertiary
Education, Skills and Employment and the Minister of Revenue, where appropriate, to
approve any detailed changes to the Student Support Package and the resulting
changes in appropriations
30.
note that Cabinet decisions on this paper are proposed to be announced as part of
Budget 2013.
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Act
Hon Steven Joyce
Hon Peter Dunne
Minister for Tertiary Education,
Minister of Revenue
Skills, and Employment
_____/_______/______
_____/_______/______
Information
Official
the
under
Released
25
Appendix A: Risks and Benefits of Budget 2013 student support proposals
Initiative
Main Advantages
Main Disadvantages
Key Impacts
Improving repayments from overseas-based borrowers and increasing personal responsibility for debt repayment
Putting in place an ongoing
Will improve the quality of
Some members of the public
Each year this will potentially impact up to
information-sharing agreement
contact information for
may see this as impinging on
12,000 overseas-based borrowers and 2,500
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between Inland Revenue and
overseas-based borrowers
privacy rights
liable parents, starting from the third quarter
Internal Affairs to collect contact
(and child support debtors) and
Will not target borrowers who
of 2013.
detail from passport applications
increase compliance
either do not have or do not
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and renewals
Provides an ongoing,
travel on New Zealand
inexpensive and high quality
passports.
Requires an Order-in-Council via the
source of contact information.
Privacy Act 1993
Increase the current student loan
Reduces risk that
May have a negative impact on
Likely to affect, on average:
and allowances stand-down for
Government’s tertiary
Pasifika students (a priority
-
around 1,560 borrowers and
permanent residents and
education investment is lost by
group) and cause concern for
-
930 student allowances recipients
Australians for study starting on
requiring permanent residents
migrant groups
Loan borrowers affected are more likely to be
Information
or after 1 January 2014
to demonstrate a greater
May compromise immigration
older borrowers, of Asian ethnicity, and
commitment to New Zealand
objectives of having New
studying at Private Training Establishments
To be eligible for student support,
after they study
Zealand as an attractive
(PTEs)
students who are not NZ Citizens will
Limits the number of people
destination
Likely to have a bigger proportionate impact
need to be ordinarily resident in New
who go overseas, are non-
Migrants who have genuinely
on older groups of allowance recipients;
Zealand, and have resided in New
compliant, and who Inland
settled in New Zealand may end
nearly 82.3% of recipients aged 65 and over
Official
Zealand for 3 years, and have held
Revenue cannot contact
up on a benefit and defer study
are permanent residents
the right to reside in New Zealand
Generates small savings for
until they are eligible
While eligibility is tightened for Permanent
indefinitely for three years.
the
reprioritisation
Moves stand-down period out of
Residents and Australians, they will still have
The policy will exempt those who
Minimises the use of student
alignment from the
the opportunity to access student support
hold refugee status, protected
support as an alternative
Unemployment Benefit which
after three years or to undertake study as a
persons status, or persons
source of living assistance
has a stand-down of two years
domestic student (but without student
sponsored by a family member who
Transition arrangements will
for permanent residents
support).
under
held refugee status or protected
prevent study disruption for
Likely to increase NZ Bill of
person status when they entered
permanent residents already in
Rights Act (BORA) complaints
New Zealand.
study in 2013.
It is too early to understand the
Transition: Those who would have
impacts of the Budget 2010 loan
been eligible for student support
stand-down initiative on
under the 2 year stand-down rule in
permanent resident borrowers in
2014 will be able to access student
relation to them leaving New
support from the date they would
Zealand after study and not
Released
have been eligible.
returning.
26
Initiative
Main Advantages
Main Disadvantages
Key Impacts
Changing the repayment regime
Would speed up repayments
Higher levels of default for non-
This would potentially impact 61,209
for overseas-based borrowers
from compliant overseas-
compliant borrowers
borrowers in total.
based borrowers and reduce
May result in some borrowers
The following table shows the number of
Implementation:
From 1 April 2014
the cost of lending
becoming non-compliant
current overseas-based borrowers in each of
1982
for the 2014/15 tax year and beyond.
Will generate small savings for
Increase in debt book
the repayment thresholds affected by this
reprioritisation
May raise equity issues e.g.
proposal:
Will make borrowers with loan
those who leave New Zealand
Loan Balance
Act
balances below $84,746 make
with $15,000 loans will repay
$15k-
$30k-
$45k-
>:$60k
payments that at least cover
$2,000pa while others overseas
$30k
$45k
$60k
their interest
with a similar loan balance
Number
Little to no impact on access to
remain in the $3,000pa
of
tertiary education.
repayment rate.
overseas-
28,657 16,156 8,633
9,763
based
borrowers
The impact on compliant borrowers at $20k,
Information
$40k, $50k and $70k respectively are:
Loan
Repayment time
Interest cost to
balance
borrower
Current
New
Current
New
regime
regime
regime
regime
$20,000
35 yrs
15 yrs
$19,940
$8,425
Official
$40,000
57 yrs
24 yrs
$57,751
$31,089
$50,000
82
21
$117,431
$33,199
years
years
the
$70,000
Never*
27
Indefinite $62,092
years
*interest exceeds repayments
Introducing the option to request
Creates a sanction that can be Raises risks relating to
Would affect a small number of most non-
an arrest warrant to prevent the
targeted and applied to the
restrictions on a person’s right to
compliant borrowers who have returned to
under
most non-compliant borrowers
worst cases of default while
freedom of movement
New Zealand and who wish to travel overseas
from leaving the country
deterring the wider group of
May discourage people from
again.
borrowers from not complying.
returning to New Zealand
Implementation: From 1 July 2013
May be considered draconian by
Would require changes to the
some members of the general
Student Loan Scheme Act 2011.
public.
Raises risk of police being seen
Released
as Inland Revenue debt-
collection agents
27
Initiative
Main Advantages
Main Disadvantages
Key Impacts
Targeting student allowances more tightly on the basis of returns to study
Reducing student allowance life-
Generates savings for
May provide a disincentive for
We estimate that:
time limit for those aged 40 and
reprioritisation
some to access tertiary study
o under an 80 week limit 2,447 recipients,
over from 200 weeks to 80 weeks Reduces dead-weight costs
Likely to raise BORA issues (in
on average per annum, would be affected
1982
(or a variant of 120 weeks) from 1
(i.e. people who would study
terms of justifiable grounds) and
by this policy change
January 2014
without the allowance)
complaints
o under the 120 week variant option, 980
Minimises the number of
May pose risks to Tertiary
recipients, on average per annum, would
Act
Transition:
Those
receiving
an
people using the assistance as
Education Strategy (TES)
be affected.
allowance in 2013 will be able to
an alternate source of living
objectives as it may affect those
In 2012, of borrowers aged 40 and over,
continue
their
study
with
an
support (e.g. if they don’t
in priority groups (e.g. Māori
approximately:
allowance up until 31 December
qualify for national
who participate at an older age)
o 20% were Maori, 32% European, 28.5%
2014 or until they reach the 200
superannuation).
May result in some people
Asian and 7.5% Pasifika (not counting
weeks life-time limit (whichever is
moving to the benefit support
multiple ethnicities)
the sooner).
when tertiary study may have
o 56.3% were women, 43.7% were men
o 26.6% were permanent residents, and
Requires amendment to the Student
benefited them
72.5% were Citizens or Citizens by birth
Allowances Regulations 1998.
May be seen to contradict the
Information
Government’s positive ageing
o 40.0% were at Polytechnics, 19.3% at
strategy.
Universities, 18.6% at PTEs, and 17.2%
at Wānanga
o 43.4% were married, de facto or in a civil
union, 56.5% were single.
Data for 2012 indicates that 42.0% of student
Official
allowances recipients aged 40 and over had
dependants compared to 9.8% overall.
the
under
Released
28
Initiative
Main Advantages
Main Disadvantages
Key Impacts
Removing student allowances
Generates savings for
May not be well-received by age This policy is likely to affect around 240 recipients
eligibility for those aged 65 and
reprioritisation
concern groups (e.g. Grey
each year on average.
over from 1 January 2014
Minimises the number of
Power)
people using the assistance as
Likely to raise BORA complaints In 2012, of 231 recipients 65 and over:
1982
Transition: Those receiving an
an alternate source of living
May be seen to contradict other
permanent residents were over-represented
allowance in 2013 will be able to
support.
New Zealand ageing strategies
(82.3%, compared to 14.9% overall)
continue their study with an
such as the Government’s
males are over-represented (63%, compared
Act
allowance up until 31 December
positive ageing strategy
to 46% overall)
2014 or until they reach the 200
Removes a safety net for those
Asian recipients are over-represented (84%,
weeks life-time limit (whichever is
who lost eligibility for student
compared to 18.9% overall)
the sooner).
loan living costs in Budget 2011.
most were studying at sub-degree level
(92.6%)
Requires amendment to the Student
39.0% studied at polytechnics, 25.1% at PTEs
Allowances Regulations 1998.
and 22.5% at wananga.
61.5% of aged 65 and over had dependents
compared to 9.8% overall.
Information
Official
the
under
Released
29
1982
Act
Information
Official
the
under
Released
30
Document 5
Regulatory Impact Statement
Student Support Package for Budget 2013
1982
Agency Disclosure Statement
This Regulatory Impact Statement has been prepared by the Ministry of Education.
Act
It considers options that improve the value of the student support system to the
Government, while also ensuring that the Student Loan Scheme and student
allowances are contributing to tertiary education priorities.
The following changes have been analysed:
- targeting student allowances and/or loans on the basis of returns to study and
on initial years of study by removing or reducing entitlement through progressive
decreases based on age and/or weeks of study
- extending the current student loan and student allowances stand-down period
Information
for permanent residents and Australians from 2 years to 3 years to increase our
confidence that permanent residents wil stay in New Zealand when they finish their
study and repay their student loans
- increasing repayment obligations for overseas-based borrowers to speed up
repayments
- making it an offence for a borrower to knowingly default on an overseas-based
Official
borrower repayment obligation so that an arrest warrant can be requested to
prevent the most non-compliant borrowers from leaving the country from 1 July
2013
the
- issuing passports with reduced validity periods or delaying the processing of
passports for applicants with student loan default
- putting in place an ongoing information-sharing agreement between Inland
Revenue and Internal Affairs to obtain further contact details from overseas-based
borrowers and liable parents when they renew or apply for their passport
under
- removing student allowance eligibility for people in student loan default of
more than $500 for over one year.
Ben O’Meara
Group Manager, Schooling Policy, Ministry of Education
22 March 2013
Released
1
Executive Summary
The Government spends a significant amount of money each year to fund tertiary
education. Spending on student allowances has increased by 69% since 2007/2008.
In addition the number of student loan borrowers going overseas and into default
continues to increase.
The tertiary environment has changed significantly since the early 1990s, when student
loans and allowances were introduced. The design of student allowances has not been
1982
reviewed since student loans became more subsidised, with interest subsidies and
interest-free loans.
The fiscal environment requires effective use of constrained resources. The objective
Act
of proposals in this paper is to adjust the student support system to contain tertiary
education expenditure and improve its performance, while maintaining interest-free
student loans. The proposals seek to address the increasing cost of Student Support
to the Crown and the taxpayer, and thereby achieve a fairer distribution of benefits and
costs between current and future taxpayers.
The main policy levers available to the Government to achieve this are:
• to target access to the student support system (i.e. Student Loan Scheme and
student allowances)
• to introduce new methods to encourage or require student loan repayments.
Information
The proposed package of changes outlined in this Regulatory Impact Statement (RIS)
has been designed to achieve the objectives outlined above. The changes proposed
are:
• targeting student allowances more tightly on the basis of returns to study and to
initial years of study and increasing the contribution that people make to their tertiary
education, for example by:
o removing student allowances eligibility for
Official those over a certain age (e.g. 65
years)
o reducing student allowance lifetime limits (e.g. 80 weeks) for those over a
certain age
the
• improving repayments from overseas-based borrowers and increasing personal
responsibility for debt repayment, for example by:
o extending the student loan and student allowance stand-down period for
permanent residents and Australians from 2 years to 3 years from 1
January 2014
under
o adjusting the overseas-based borrower repayment regime, from 1 April
2014 for 2014/15 and beyond, by introducing:
i. a fixed repayment obligation for overseas-based borrowers at
no less than the rate they pay when they leave New Zealand
ii. additional repayment thresholds for overseas-based borrowers
o making it an offence for a borrower to knowingly default on an overseas-
based borrower repayment obligation so that an arrest warrant can be
requested to prevent the most non-compliant borrowers from leaving the
country from 1 July 2013
o putting in place an ongoing information-sharing agreement between Inland
Released
Revenue and Internal Affairs to obtain further contact details from
overseas-based borrowers and liable parents when they renew or apply for
their passport.
2
link to page 57
Status Quo – Student Support System
The Government spends a significant amount of money each year to fund tertiary
education. In 2011/12, the Government spent $2,255 million on tuition subsidies,
students drew $1,586 million on new student loan lending, and the Government paid
$649 million on student allowances. Tuition subsidies, student loans, and student
allowances combined have represented between 6% and 7% of core Crown
expenditure in each year between 1994/5 and 2011/12.
1982
New Zealand spends slightly more on tertiary education than most other OECD
countries, as a proportion of GDP, but this has been declining over the past three
years.
1 When public subsidies to households are excluded (including student loans,
scholarships and grants) New Zealand's public expenditure on tertiary education as a
Act
percentage of GDP (1.1 percent) is currently the same as the OECD average.
OECD countries spend, on average, 20.5% of their public budgets for tertiary
education on financial aid to students. New Zealand spends more than double this
proportion (43.1%), and is second behind the UK (54.2%) on the proportion of total
public tertiary education expenditure that goes on supporting students.
The student support system is designed to reduce financial barriers to participation in
tertiary education. The Student Loan Scheme provides broad access to upfront finance
with repayments to be met from future earnings, while allowances aim to address the
financial barriers to study for low-income groups, students with very little upfront cash
Information
or family resources, and those who may heavily discount the future benefits of
qualifications. They also provide additional living costs support for students with higher
financial needs, for example those with dependants. Loans involve a lower level of
government subsidy than allowances, so they are a means of managing the trade-offs
between access to study and affordability for Government.
In the context of the current economic downturn, the objective of recent student support
Budget policy changes has been to improve the value for money of student support
Official
expenditure, particularly as the Government is commit ed to providing near universal
student loans and maintaining high levels of tertiary education participation.
the
Student Al owances
Government expenditure on student allowances has increased significantly in recent
years – from $385 mil ion in 2007/2008 to $649 mil ion in 2011/12 (a 69% increase).
The number of students receiving an allowance has also increased, particularly since
under
Released
1 OECD,
Education at a Glance, 2012.
3
link to page 58 link to page 58
2009, due to policy changes and the effects of the recession, including higher tertiary
enrolments due to increased unemployment.
In addition, the design of student allowances has not been reviewed since student
loans became more subsidised, with interest subsidies and interest-free loans.
Al owances play an important role, as supplementary support to student loans:
• to assist people to enter tertiary education who have very little upfront cash or family
resources
1982
• to provide additional support for students with higher financial needs, for example,
those with dependants who do not have the means to meet their costs
independently
• to provide additional support in initial years of study for those who may not recognise
Act
the future benefits of tertiary study
• to reduce barriers for people who lack prior educational achievement by enabling
them to gain initial qualifications.
Student allowances are not well targeted to those in most need. Policy changes to the
parental income threshold mean that the original intent of allowances as a mechanism
to support students from low income backgrounds has broadened to include middle
income families. Some student allowance recipients are likely to earn higher incomes
as a result of study, and would have undertaken tertiary study regardless of student
allowance eligibility.
Information
In Budget 2012, we made changes to student al owances to begin shifting the focus of
support back to students from lower income backgrounds by freezing student
allowance parental income thresholds. We also tightened the targeting of the scheme
so that it centres more on students in their initial years of study by removing eligibility
for postgraduate study and long programmes.
There is room to improve the targeting of student allowances. For example, some
Official
recipients are likely to earn higher incomes as a result of study and would have
undertaken tertiary study regardless of student allowance eligibility (i.e. representing
dead-weight costs).
the
For example, for students over 24, targeting based on personal income while studying
full time is not a good proxy for need – people are forgoing income to invest in study
that will lead to jobs with higher incomes in the future. In 2011, 68% of all student
allowance recipients studied at levels seven and above. Our research shows that, five
years after finishing study, the median earnings of young people who complete a
bachelors degree is 53% above the national median earnings.
2
under
Students may also come from high income families (a student under 24 with parental
income approaching $90,000 per year can receive a partial allowance for up to 5 years
3
2 Mahoney P, et al (2013).
Moving on up – what young people earn after their tertiary education.
Released
Wel ington; Ministry of Education.
http://www.educationcounts.govt.nz/publications/tertiary_education/115410
3 200 weeks typically equates to 5 years of full-time study, not including summer school.
4
to study at degree level) currently there is limited means of determining those who may
have other resources at their disposal.
Student Loan Scheme
The Student Loan Scheme is a significant and growing asset on the Crown’s accounts.
Since its establishment in 1992, 1.1 mil ion New Zealanders have used the loan
scheme, borrowing a total of $17,155 million.
1982
The most significant component of the cost of new lending to Government is the time
value of money (the value of loans decreases over time as a result of inflation, and this
cost is not of -set through an interest charge to borrowers). The other components, in
order of significance, are:
Act
• borrowers who do not meet their repayment obligations (primarily overseas-based
borrowers)
• borrowers with low life-time earnings who do not have a repayment obligation
• death and bankruptcy.
Problem Definition and Objectives
The tertiary environment has changed significantly since the early 1990s, when student
loans and allowances were introduced. The fiscal environment requires effective use
of constrained resources. The Government's focus for tertiary education has now
moved from participation to completion of qualifications and the quality of those
Information
qualifications, including employment outcomes.
Recent Budget changes have reduced the costs of the Student Loan Scheme. Prior to
Budget 2010, the cost of lending was 47.39 cents in the dollar. The cost of lending
following Budget 2012 is 39.09 cents in the dollar. The development of proposals for
Official
the
under
Released
5
Budget 2013 sits within a wider 2012/13 student loan work programme agreed to by
Ministers in August 2012. Policy items on the work programme include exploring:
• current eligibility settings and whether any further changes are needed, given the
primary objectives of the performance framework
• the analysis of long-term non-repayment groups.
The objective of these proposals is to adjust the student support system to contain
tertiary education expenditure and improve its performance, while maintaining interest-
free student loans.
1982
The main policy levers available to the Government to achieve this are:
• to target access to the student support system (i.e. Student Loan Scheme and
student allowances)
Act
• to introduce new methods to encourage or require student loan repayments.
Budget 2013 Package
•
The proposed Budget 2013 package aims to improve the value of student support
spending by:
Tar geting more tightly on the basis of returns to study and initial years of study and increasing the
contribution that people make to their tertiary education by:
• removing student allowances eligibility for those over a certain age (e.g. 65 years)
Information
• reducing student allowance lifetime limits (e.g. 80 weeks) for those over a certain age
Improving repayments from overseas-based borrowers and increasing personal responsibility
for debt repayment by:
• extending the student loan and student allowance stand-down period for permanent
Official
residents and Australians from 2 years to 3 years from 1 January 2014
• adjusting the overseas-based borrower repayment regime, from 1 April 2014 for 2014/15
and beyond, by introducing:
the
o a fixed repayment obligation for overseas-based borrowers at no less than the
rate they pay when they leave New Zealand
o additional repayment thresholds for overseas-based borrowers
• making it an offence for a borrower to knowingly default on an overseas-based borrower
repayment obligation so that an arrest warrant can be requested to prevent the most non-
under
The propos
co al
mplsi s
a et
nt out
borr i
o n
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eavi or
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ry t fat
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1 J
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13 s eek to:
• tar
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goi or
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nftig
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and
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om peopl
overs e m
eas- ak
bas e to t
ed borr hei
ow r t
ers ertiar
and li y
able
education
par
ents when they renew or apply for their passport.
• impr
ov
e repayments from overseas-based borrowers and increasing personal
responsibility for debt repayment.
The options above also seek to address the increasing cost of the Student Loan
Scheme to the Crown and the taxpayer, and thereby achieve a fairer distribution of
benefits and costs between current and future taxpayers.
Released
These options have been developed within an interest-free student loan policy
environment. This is a significant constraint on the options available to contain
6
link to page 61
Government expenditure and improve the performance of the Scheme. In addition
options have been developed as part of a Budget sensitive process which is a
significant constraint on consultation. Key agencies involved with the Scheme – Inland
Revenue, the Ministry of Social Development, and the Treasury – have been consulted
on the proposals and this RIS.
One area of low value lending relates to borrowers whose incomes are insufficient to
make progress in repaying their loans. These borrowers are likely to remain a concern
following recent Budget changes. Many have studied below degree level,
1982
predominantly at levels three and four. The 2011 analysis of the Student Loan Scheme
identified low labour market returns are strongly associated with being over 50, a non-
New Zealand citizen, and studying below degree level. Therefore, changes focus on
improving the value of lending based on these characteristics.
Act
Any modifications to the student support system need to take into account the intention
of student loans and allowances, which is to remove financial barriers to accessing
tertiary education. Any changes would also need to be considered in the context of the
Government’s goals for tertiary education, particularly participation and achievement
for the priority groups identified in the Tertiary Education Strategy 2010-2015.
4
Specific mechanisms for restricting access to student support and increasing
repayment methods, and options within each, are discussed below. The conclusion
section contains a summary table.
Information
Savings estimates
Savings and costs included are for each independent initiative and do not take account
of interdependencies. In contrast, the final savings and costs for Budget 2013
initiatives, included in the 2013 Student Support Cabinet Paper, do include
interdependencies between initiatives. For this reason, the savings and costs for
initiatives included in the final Budget Cabinet paper may differ from those contained
in this Regulatory Impact Statement. Official
Regulatory Impact Analysis
the
Targeting on the basis of returns to study, initial years of study and
increasing the contribution that people make to their tertiary education
- Encourage a greater contribution to the cost of tertiary education from students whose study
provides a low return to taxpayers
under
- Target student allowances more closely to initial years of study
Option 1 - Status quo
Generally all people irrespective of age are entitled to government assistance to
support their participation in tertiary study (tuition subsidies, student allowances,
student loans).
There are some instances where people are treated differently at certain ages, which
include:
Released
4 Young people aged under 25, Māori students, Pasifika students.
7
• older student allowance recipients (i.e. those 24 and over) are generally paid higher
rates of allowance than younger recipients (to help meet the increased obligations
and commitments of older people)
• older student allowance recipients (i.e. those 24 and over) are not parentally income
tested (as there is no expectation that parents wil support them)
• no student allowance for those who are in receipt of National Superannuation (to
avoid double-dipping)
• loan borrowers aged 55 and over cannot borrow for living costs or course-related
costs (to reflect diminished public and private returns on the education investment).
1982
The longstanding limit to how long a student can receive a student allowance (200
weeks) now operates alongside a lifetime limit on how much study a student can
borrow for (7 EFTS).
Act
These current settings do not align well with the intended objectives for the student
allowance scheme, particularly for people aged 24 and over. Al owances are not well
targeted in terms of supporting study at lower levels, and students from low socio-
economic backgrounds. Some student allowance recipients are likely to earn higher
income as a result of study, and to have undertaken tertiary study regardless of student
allowance eligibility.
Data about student allowance recipients show that certain trends which are steady
among younger age groups begin to distort among older age groups. A significant
proportion of older people who are receiving a student allowance are permanent
Information
residents: between the ages of 30 and 54 there is a steady proportion of approximately
22% which increases steeply after age 55 to 30.8%, reaching 45.6% of recipients aged
60 - 64. In the group aged 65 and over, 82.3% of student allowance recipients are
permanent residents.
Significant over-representation of permanent residents at older ages suggests some
may be accessing the allowances to undertake study, where the benefits are not well
aligned to the objectives of the student allowances scheme. There are also similar
Official
trends of increases of older people at secondary schools, studying at low levels. One
of the key reasons for providing student support is to enable people to invest in their
future, including their future in the workforce.
the
Study undertaken by these students is unlikely to have significant economic benefits
for New Zealand, as these people are unlikely to enter the labour market. Study with
high associated social benefits (for example improving English-language skills) could
be achieved through part-time study (not eligible for an allowance) or adult and
community education.
under
Currently, students undertaking part-time part-year study can only borrow for their
compulsory fees. The study status of student loan borrowers is determined according
to the EFTS weighting of their course of study and the length of their course in weeks.
Part-time part-year study requires a minimum EFTS load of 0.25 EFTS.
The Government’s return on investment is lower for part-time study than for full-time
study. There are two types of low value lending within this group: those associated with
poor repayment performance and low labour market returns (e.g. part-time courses for
personal development) and those who may not need the current level of subsidy in
Released
order to participate in tertiary education (e.g. people who are working ful -time and
studying small amounts of study). Poor labour market returns and repayment
8
link to page 63
performance for this group are due, in part, to lower completion rates for part-time
study than for full-time study.
Option 2 – Remove eligibility for student loans and/or student allowances for people
over a certain age (e.g. 65, or 55)
Options available would remove eligibility for student loans and / or allowances by
removing eligibility for people over a certain age (for example age 65, or 55). 1982
Considering that student loan living costs are no longer available to people aged 55
and over, the rationale for retaining eligibility for (the more highly subsidised) student
allowances is not strong. This group stil has access to interest-free course fees (which
act as a backstop and require a greater contribution to the cost of education from the
Act
borrower than allowances) as well as tuition subsidies to support their study.
An upper age limit of 65 for student allowances (and indexed to any increases to the
age at which people become eligible for superannuation) would reduce the amount of
support provided for study with low economic returns.
Those affected would stil have access to tuition subsidies (covering approximately
75% of the cost of tuition) and interest-free student loans for course fees – this depends
on what loan options are progressed.
5 New Zealand Citizens with access to New
Zealand Superannuation would effectively not be disadvantaged, as there is already a
restriction on receiving both forms of support simultaneously.
Information
Options in this category would likely increase use of welfare benefits by affected
students, particularly as people over 55 can no longer borrow from the Student Loan
Scheme for living costs. This would reduce overall savings to Government.
Changes made during Budget 2011 are projected to remove or reduce borrowing by
approximately 75% of borrowers aged 55 and over. As the number of older people in
the workforce continue to increase opportunities for upskil ing and retraining will be
Official
important.
Option 3 – Reduce eligibility for student allowance
the
Available options would:
• restrict eligibility for student allowance by lowering the tertiary lifetime limit (e.g. to
160 weeks down from 200 weeks)
• and/or further lower the tertiary lifetime limit (e.g. to 120, or 80 weeks down from
200 weeks) for people over a certain age (e.g. people aged over 55, 40, or 35).
under
Unlike younger learners, it is possible for mature students to have already received
taxpayer support to gain tertiary qualifications. Given the constrained nature of tertiary
education expenditure, this raises questions surrounding reasonable levels of support
for subsequent qualifications and for types of further study (e.g. up-skilling due to
labour market demands vs. further study for non-vocational purposes).
It may be difficult to identify, using a broad approach (such as targeting by level of
study), who is studying for which purpose. The existing 7 EFTS loan and longstanding
Released
5 Included in the options for the student loan package for Budget 2013 is to restrict al loan borrowing for
either people aged over 55, or aged over 65. If both loans and allowance eligibility were removed from
one of these groups this would have further flow-on implications
9
link to page 64
200 week allowance lifetime limits attempt to address these issues by limiting
entitlement and encouraging wise study choices.
The main advantage of using lifetime limits to target student allowances is that these
are a simple means by which previous access can be measured. In the absence of
creating a more complex and costly administrative system, it can be used as a rough
proxy for existing qualifications, or the amount of prior education a person has already
received government support for. This is a method of ensuring everyone receives a
fair share of subsidy. Lifetime limits are also more flexible in responding to people’s
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individual study needs and a more effective way of targeting than age alone.
The 200 week limit provides approximately five years worth of student support (based
on a 40 week year). Reducing the 200 week lifetime entitlement for people over a
Act
certain age, for example to 80 weeks (approximately two years of study), would reduce
spending while stil providing a pathway for people who may require upskil ing to
support themselves, or who missed out on foundation level education. An 80 week limit
would generally enable a person to complete up to 240 credits of study (which would
enable a person to undertake most sub-degree level study including foundation level
study, most certificates and diplomas).
Our data shows that very few people access a student allowance for longer than 80
weeks. Even fewer access the allowance for as long as 120 weeks, the amount of
allowance (approximately three years of support) which would generally be required to
gain a degree. Data from 2004 – 2012 show that of recipients aged 35 and over 80.3%
are using fewer than 80 weeks. Overall 89.6% of recipients use fewer than 120 weeks
Information
of student allowance, and 76.1% use fewer than 80 weeks.
In addition, people in older age groups are more likely to be studying at sub-degree
level. In 2012 over 57% of recipients aged 35 and over were studying at sub-degree
level (compared to only 33.6% of allowance recipients aged under 35 and 36.8%
overall). This increases with age (60.1% of recipients aged 40 and over were studying
at sub-degree level).
Official
Lowering the 200 week lifetime limit would be consistent with refocusing student
allowances on initial years of study, and initial qualifications (this approach is supported
by evidence that suggests that a student’s first year in tertiary education is the most
the
important for ensuring their success
).6
A reduced length of support put in place from a certain age would continue to enable
people (particularly those who have not previously accessed student support) to add
to their skil s later in life to allow them to continue to participate in the labour force.
Options in this category recognise that the public returns to New Zealand of investment
under
in degree level study decrease as people age and their remaining time left in the
workforce decreases.
Māori (a priority learner group) are over-represented among older allowance
recipients. This reflects that Māori tend to study at later ages. Māori also tend to have
children at earlier ages which may lead to them delaying the start of their study. Of
recipients aged 35 and over, Māori make up 19.5% compared to around 10% of
6 Jacques van der Meer, Austina Clark and Chikako van Koten
Establishing Baseline Data: using
Released
International Data to Learn More About Completion Factors at One New Zealand University. Journal of
Institutional Research, 2008. Jacques van der Meer
I don’t even know what her name is: Considering
the challenge of interaction during the first year. Studies in Learning, Evaluation Innovation and
Development, 2009.
10
link to page 65
allowance recipients overall. In 2012 there were 2,569 allowance recipients aged 35
and over who identified as Māori.
7
Māori also tend to access the student allowance for a shorter duration of time. Data
from 2004 – 2011 shows that 88.8% of Māori student allowance recipients accessed
the allowance for 80 weeks or less and used an average of 40.10 weeks (14.6% lower
than the overall average). While younger age bands may have a negative impact on
Māori learners, the impact from a reduced lifetime limit on current patterns of access
is likely to be minor.
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Options
Pros
Cons
• Improves targeting of support to • Depending on the option chosen, may only
initial years of study and initial
be sufficient to support part of a qualification
Act
qualifications.
or a full sub-degree qualification.
• Simple means of measuring
• Removing or reducing eligibility for student
previous access.
allowances result in some people taking up
• More consistent with current
the unemployment benefit, accommodation
patterns of use (76.1% of
supplement and other forms of welfare
recipients overal use fewer
support.
Reduced
than 80 weeks of allowance).
• Reduces the level of support available for
lifetime
• Flexible in responding to
some students with dependants.
limits
individual study needs (as
opposed to limits based on level
or type of study).
• Encourages people undertaking
Information
longer courses to contribute a
greater share of the cost of their
education.
• Those under age 55 can stil
borrow for living costs.
• Reducing eligibility for people
• The lower any age band is set the more this
over a certain age could be
is likely to jeopardise access objectives in
combined with removing
particular by affecting certain groups such
Official
allowance eligibility completely
as:
at older ages, for e.g. from
o Māori who tend to study at a later age
those aged over 65.
o parents, particularly Māori and Pasifika
• Creates a tiered structure of
women who tend to have children at
the
reducing eligibility as people
younger ages than European and Asian
Reduced
age.
women.
eligibility
• Refocuses student support on
• Could be chal enged under the New Zealand
based on
younger priority learners while
Bil of Rights Act 1990 (BoRA) – however
age
leaving a pathway for up-skilling
precedent of restriction for those 55 and over
to recognise some of the
already established in the loan scheme.
training needs of an aging
• Stronger arguments can be formed for
under
workforce, particularly for those
excluding older people (e.g. 55 and over)
who have not previously
likely to spend less time in the workforce,
accessed support.
than for younger people (e.g. a limit for 30
• More consistent with current
year olds which may contradict the BPS
patterns of study (older age
target to increase the number of 25 – 34
groups are more likely to study
year olds with higher level qualifications).
at sub-degree level).
Option estimates summary table
Released
7 This figure does not include people identifying as both Māori and another ethnicity
11
Targeting on the basis of returns to study, initial years of study and increasing the contribution
that people make to their tertiary education*
Part of
Options
Preferred
Policy savings
Recipients
problem
option(s)
initial estimates affected
addressed
(4 years net)
(average
pa)
Encourage a
Option 1 – Status quo
Remove
2.
2.
greater
student
a. ($54.12m) SA
a. 1,773 SA,
contribution to
Option 2 –
Remove eligibility allowance
($6.00m) SL
700 SL
the cost of
for student loans (SLs) and/or eligibility over
b. 310 SA,
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tertiary
student al owance (SA) for
the age of 65
b. ($6.50m) SA -
200 SL
education from
people over
based on 2015
students whose a.55, or
implementation
3.
study provides
b. 65
Reduce
And ($2.00m) SL
a. 1,998
a low return to
eligibility for
Act
taxpayers
Option 3
those over a
b. 2,000
3.
a. Reduce the 200 week
certain age to
c. 1,900
Target student
lifetime limit from 200 weeks
80 weeks
a. ($23.76m)
d. 385
allowances
down to 160 weeks
b. ($55.30m)
e.155
more closely to
c. ($41.70m)
initial years of
b. Reduce SA eligibility for
d. ($10.30m)
study
those aged 35 and over to 80
e. ($3.54m)
weeks
c. Reduce SA eligibility for
those over 40 to 80 weeks
d. Reduce SA eligibility for
Information
those aged 55 and over to 80
weeks
e. Reduce SA eligibility for
those aged 55 and over to
120 weeks
*Savings estimates are initial estimates only and do not include administrative costs, student loan or
welfare flow on costs (such as take up of job seeker benefits). Final quality assured costings for final
options are provided in the Cabinet paper. Official
Improving repayments from o
the
verseas-based borrowers (OBBs) and
increasing personal responsibility for debt repayment
- Reduces high risk spending
- Reduces unnecessary and high-risk borrowing
- Support existing initiatives to increase debt repayment from overseas based borrowers and
under
increase personal responsibility for debt repayment
Option 1 - Status quo
Currently there is a two year stand down period for permanent residents before they
can access the student allowance or the Student Loan Scheme. This aligns with the
two year stand down period before permanent residents can access the unemployment
benefit.
As outlined, the data indicates that a number of people may be accessing student
allowances to under
Released take study, where the benefits are not well aligned to the objectives
of the student allowance scheme. Significant over-representation of permanent
residents at older ages suggests some may be accessing the allowance as an
12
link to page 67
alternative to other forms of living support. There are also similar trends of increased
numbers of older people at secondary schools, studying at low levels and supporting
dependant partners.
While non-citizens who remain in New Zealand after study represent good value
investment and lending for the Government, those who go overseas are more likely to
default on their student loans than borrowers who are New Zealand citizens. Our
research indicates that permanent residents and Australians are more likely to go
overseas than New Zealand Citizens and are less likely to return.
8 As at 31 March
1982
2011, of the proportion of overseas-based borrowers who were in default, 29.3% were
Australian citizens, 14.5% were Chinese citizens and 12.6% were New Zealand
citizens.
Act
Student allowances provide a higher level of support than student loan living costs,
and do not need to be repaid. There is a question as to whether obligations for student
allowance recipients are set at the right level.
Currently the only non-administrative obligation on student allowance recipients is to
pass more than half of their study load. Options exist to strengthen obligations by
ensuring that student allowance recipients who are in serious default on a student loan
meet their repayment obligations.
In general 85% of student allowance recipients also have a student loan. As at April
2012, approximately 64,000 student allowance recipients had also borrowed from the
Student Loan Scheme in 2012 (for fees, course related costs, or living costs to top up
Information
a partial allowance). Of these, 3.3% (2134 recipients) were in default on previous
student loan borrowing. Just under half of these borrowers (940 allowance recipients)
are in default of over $500, with 76 recipients in default of over $6000, and 27 in default
of over $10,000.
Our analysis of the Student Loan Scheme has identified three broad types of borrower
groups that represent low value lending. These are those:
Official
• whose labour market returns are insufficient to make progress in repaying their
loans (including borrowers under the repayment threshold, borrowers with large
student loans who have poor labour market outcomes, and those who use loans for
non-educational purposes) the
• who go overseas and do not repay (who may or may not have high incomes)
• who would stil participate in tertiary education if the government subsidy on student
loans was reduced (for example, while lending to this group may be high value, it
may be unnecessary).
under
Overseas-based borrowers comprise a high proportion of long-term compliance costs.
Under current valuation assumptions, if all overseas-based borrowers were compliant
(stil allowing for death and bankruptcy write-offs) the value of new lending would
increase by 3 cents in the dollar.
Overseas-based borrowers have much lower repayment compliance, slower
repayment times, and potentially lower repayment obligations than New Zealand–
based borrowers. The higher domestic compliance is largely due to compulsory
collection through the income tax system and sanctions which are more easily
enforced when non-compliance occurs.
Released
8 Smyth,R and Spackman,D (2012) Going Abroad. Wel ington: Ministry of Education.
13
As at 30 June 2012, there were 701,232 borrower accounts held by Inland Revenue.
Of these borrowers, 101,095 (14%) were overseas based. However, these borrowers
represented 58% of all borrowers with overdue payments (53,471) and had 80% of all
overdue debt ($409.5m).
Table 1: Overdue student loan repayments at 30 June
Overdue
2011
2012
%
Repayments
$million
$million
change
1982
Borrowers based
-in New Zealand
$122.8
$102.6
-16.4%
-overseas
$288.9
$409.7
41.8%
Act
Total
$411.7
$512.3
24.5%
__________________ _______ ________ __________
Number of borrowers
-in New Zealand
49,803
38,577
-22.5%
-overseas
50,264
53,471
6.4 Source: Student Loan Scheme
Total
100,067
92,048
-8.0% Report, 2012
The number of borrowers going overseas and into default continues to increase with
the default levels having climbed to $421m by 31 December 2012 and $423m by 31
Information
January 2013.
The high level of default is primarily due to a significant portion of borrowers not
meeting their obligations of keeping Inland Revenue up to date with their contact
details and making payments. Evidence to date from the OBB collection initiatives
(OBBCI) reflects the importance of maintaining contact with overseas-based
borrowers. Inland Revenue have had a 70% compliance rate among borrowers it has
Official
contacted as part of this initiative.
Currently there is a three-stepped repayment regime for OBBs based on their loan
balance, while the regime for those based in New Zealand is income-contingent.
the
Unless they are on a repayment holiday, OBBs are required to make repayments every
six months (September and March). Interest is charged from the day the borrower
leaves New Zealand.
Loan Balance
Amount due per year
<= $1,000
The whole balance
under
>$1,000 and <= $15,000
$1,000
>$15,000 and <= $30,000
$2,000
>$30,000
$3,000
The current overseas-based borrower regime strives to strike a balance between a
borrower’s ability to repay and quick repayment of student loans. For borrowers who
are compliant with their student loan obligations, Inland Revenue currently
automatically reduce their repayments based on their loan balance.
However, for about 14% of overseas-based borrowers (i.e. those who have a student
Released
loan balance over $50,847) the amount due per year means that the compulsory
repayments they make wil not exceed the interest charged on their loan. These 14,581
borrowers wil continue to see their student loan balance increase.
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link to page 69
Option 5 - Change eligibility based on residency status9
Available options would restrict eligibility for student allowances by either:
• extending the current student loan and student allowance stand-down period for
permanent residents and Australians from 2 years to 3 years from 1 January 2014
to increase our confidence that permanent residents wil stay in New Zealand when
they finish their study and repay their student loans; and/or
• removing student allowance eligibility from Permanent Residents aged 55 and over.
1982
Australians and permanent residents are more likely to move overseas and not return.
There are also many permanent residents commit ed to staying in New Zealand (some
of whom are not able to obtain citizenship because of laws in their country of
origin). The stand-down period aims to distinguish between those who intend to stay
Act
from those that intend to leave. The mechanism for targeting on this basis is ‘front-
loaded’; permanent residents who demonstrate a commitment to New Zealand are not
treated any differently from citizens after a certain point.
Extending the stand-down period for permanent residents and Australians would mean
that migrants wil need to have lived in New Zealand for at least three years, be
ordinarily in New Zealand, and have held a residency class visa under the Immigration
Act 2009 for at least three years to qualify for a student loan or allowance. This option
would apply to both the student allowance and Student Loan Scheme to maintain
consistency. Restricting eligibility from permanent residents would reduce support for
study with relatively low benefit to New Zealand without disadvantaging New Zealand
Information
citizens.
A consequence of this proposal is that it would move student support policy out of
alignment with the benefit system. Options in this category may result in greater take
up of other forms of assistance such as the unemployment benefit reducing overall
savings, but would signal an expectation that people commit to New Zealand before
undertaking study.
Official
An alternative option is to remove eligibility for permanent residents over a certain age
(e.g. 55). Removing eligibility from older permanent residents would remove support
for study with relatively low benefit to New Zealand without disadvantaging New
the
Zealand citizens, or young people. It may, however, leave older new migrants without
options to up skil . It may also have a minor negative impact on Pasifika learners; in
2011 there were 28 Pasifika permanent residents over the age of 55 receiving an
allowance.
Option 6 – Adjust the overseas-based borrower repayment regime
under
Options available would improve repayments from overseas-based borrowers and
increase personal responsibility for debt repayment by:
• adjusting the overseas-based borrower repayment regime to improve the long-term
sustainability of the scheme by speeding up repayments of compliant overseas-
based borrowers and ensuring they can make progress on their loans –by:
Released
9 ‘Permanent Resident’ includes Australian citizens but does not include students who hold refugee
status, protected persons status, or persons sponsored by a family member who held refugee status
or protected person status when they entered NZ.
15
o adding higher repayment thresholds for overseas-based borrowers with larger
student loans post legislation enactment
o fixing the repayment obligation for overseas-based borrowers at no less than the
rate they pay when they leave New Zealand from 1 April 2014 for the 2014/15
tax year
• introducing border restrictions for non-compliant borrowers as a sanction for non-
compliance by 1 April 2014 for the 2014/15 tax year and beyond.
Increasing overseas-based borrower repayments
1982
Increasing the repayment amounts due each year would ensure that overseas-based
borrowers repay their loans faster and that more borrowers wil make repayments that
would at least cover interest on their loans. Available options would make changes to
Act
the thresholds and repayment obligations of overseas-based borrowers to speed up
repayments for compliant borrowers by:
a. adding two additional steps to the current overseas-based repayment regime with
larger amounts due per year from 1 April 2014, as set out in Table 2. This would
ensure that a larger proportion of compliant borrowers are required to make
payments that at least cover the interest on their student loans.
Table 2: Proposed repayment obligations for overseas-based borrowers
Loan Balance
Amount due per year
<= $1,000
The whole balance
Information
>$1,000 and <= $15,000
$1,000
>$15,000 and <= $30,000
$2,000
>$30,000 and <= $45,000
$3,000
>$45,000 and <= $60,000
$4,000
>$60,000
$5,000
b. introducing a fixed repayment obligation for overseas-based borrowers set at no
less than their annual obligation at the time they leave New Zealand. This obligation
Official
would remain until their loan is repaid. Commercial loans operate on the same
basis. As indicated in Table 1, a borrower with a loan balance of $16,000 would
need to repay $2,000 a year until they are debt- free (that is, their obligation would
not reduce as their loan balance reduces as is currently the case). Borrowers
the
already overseas when the change is made would be fixed on the repayment rate
they are currently on, not the one they had when they left New Zealand.
These changes would apply from 1 April 2014 for the 2014/15 tax year.
Proposals to change the overseas-based borrowers regime fall into a broader package
under
of policy changes that are designed to improve collection from overseas-based
borrowers and increase borrower responsibility for debt repayment, including the
recent overseas-based borrower collection initiatives (OBBCI).
The changes for overseas-based borrowers proposed in this paper are intended to
complement other initiatives already in place, by encouraging those people who are
not currently meeting (or aware of) their obligations, to take notice of their
responsibilities as borrowers and take compliance more seriously.
This policy change is intended as a long term measure to improve sustainability. Based
Released
solely on current levels of compliance, projected debt levels will increase. However the
current initiatives which form the OBBCI are designed to improve levels of compliance
in the future. Proposed changes to the repayment regime will pay dividends over the
16
long-term provided compliance increases, and wil improve the overall sustainability of
the Student Loan Scheme as a whole.
There is a specific rationale for introducing additional thresholds for overseas-based
borrowers with very large balances, as the rates that are currently paid by many of
these borrowers are not sufficient to service their interest payments. The new policy
wil reduce the proportion of compliant borrowers who do not cover their interest
payments on their student loans from 14% (potentially up to 14,581 borrowers) to about
3.5% (potentially up to 3,758 borrowers).
1982
The proposed regime would increase the repayment obligations for overseas
borrowers, a large proportion of whom are already in default. The proposed changes
wil therefore increase the rate of growth of default unless these borrowers start to meet
Act
their repayment obligations.
The current level of overseas-based borrower default continues to grow and reached
$423 mil ion by 31 January 2013. By 2015 the level of default is expected to reach
$769 million, excluding the impact of these policies. With the introduction of the new
repayment rates and thresholds, borrowers in default wil owe an additional $19 mil ion
by 2015. This $19 mil ion is before the addition of any penalty interest and subsequent
compounding.
The growth in the level of default of overseas-based borrowers is largely because
approximately 20,000 borrowers with loans were given an amnesty in 2007 and have
not repaid anything since. These borrowers have large loan balanc
Information es and their
repayment obligations wil increase with the addition of new repayment thresholds and
rates. Unless compliance among this group of borrowers improves significantly, the
rate of growth of default for these borrowers will accelerate.
Although the OBBCI is making good progress collecting from non-compliant borrowers,
the rate at which the default amounts of overseas borrowers is growing is faster than
the rate at which compliance is increasing. Increasing the repayment obligations of
Official
these borrowers wil mean that it wil take longer to slow and eventually reverse the
rate of growth of overseas default amounts.
the
The impact of this policy on the compliance of overseas-based borrowers is uncertain,
particularly given the impact on compliance of the OBBCI is difficult to predict. However
there is a risk that some previously compliant borrowers with balances greater than
$45,000 wil stop repaying or repay less than their obligation because of the higher
repayment rate.
Officials have also stated that t
under hey do not expect the faster recovery of loans from
compliant borrowers under this proposal to generate any savings in the short term.
This is because for compliant borrowers the interest on their loans is approximately
equivalent to the Crown discount rate, so faster repayments do not generate any
significant improvement in the value of the loan book. For those borrowers that remain
non-compliant the new policy simply increases their outstanding level of default.
In the absence of income information, the current overseas-based borrower regime
bases repayment obligations on current loan balances. Imposing a repayment floor for
overseas-based borrowers means that repayment obligations wil be based on a
Released
historic loan balance - the balance when the borrower left New Zealand. This creates
an inequity whereby two loan borrowers with the same loan balances may have
17
different repayment obligations if one of the borrower’s loan balances was historically
higher.
Option 7 – Border restrictions
This option would introduce new sanctions for defaulting on student loan repayments
for the most non-compliant overseas-based borrowers by either:
• delaying the processing, or reduce the validity of passports; and/or
• extending the child support border arrest system to student loan debtors. 1982
When a New Zealand-based borrower falls behind in their payments Inland Revenue
has a full suite of tools available to get the borrower back on track. This ranges from
Act
reminder letters and phone calls, to deductions from wages or bank accounts through
to legal action and bankruptcy in the most serious cases.
As overseas-based borrowers are not within New Zealand’s jurisdiction, Inland
Revenue has fewer tools available to enforce payment from borrowers living overseas.
Currently approximately 70% of overseas-based borrowers in default become
compliant once they are contacted. However the remaining 30% do not respond to
requests or late payment penalties and additional leverage is required. At the moment
legal action is the primary tool used to borrowers that continuously resist paying. Legal
action is ef ective against resistant borrowers, most wil come to an arrangement
before the matter reaches the courts, but it is time consuming and expensive.
Information
Officials considered sanctions that focused on two common interactions overseas
borrowers have with the New Zealand Government – applying for a New Zealand
passport and crossing the border into or out of New Zealand.
Passport applications
Official
With regards to passports officials looked at either issuing passports with reduced
validity or delaying the processing of passports for applicants with default. For these
proposals Inland Revenue would provide a list of borrowers with outstanding student
loan debt to Internal Affairs. If a borrower on that list applies for a passport they wil
the
be required to reach a settlement with Inland Revenue regarding their debt. If the
borrower does not reach settlement they wil have their passport valid for a period less
than the usual five years or have the processing for their passport delayed.
The option to issue passports for a reduced period of validity offered a strong incentive
to motivate borrowers to comply with their obligations. However, this option would
under
have an unpredictable impact on travellers going through border processing at foreign
borders. If a passport were issued for a shortened validity period questions could be
raised about the character of the traveller, which may result in him or her being refused
entry to a country.
While the primary impact of increased cost and inconvenience may be seen as a
proportionate response, the secondary impacts are unpredictable and difficult to
effectively mitigate. Travellers crossing the border in non-English speaking countries,
particularly in the developing world, may already be in a vulnerable position.
Released
The option to delay passport processing would have a more varied impact than
intended, being harsher in some cases and less effective in others.
18
Borrowers who cannot wait the additional processing time face a harsher sanction than
the intended temporary inconvenience. Those who are in New Zealand, for example,
and need their passport for travel would be facing an effective travel ban: if they do not
pay, they cannot leave the country. Borrowers who are overseas and whose passports
expire within the extended processing period are potentially il egal immigrants.
Those who can wait the additional processing time have little incentive to address their
arrears as the delay would not adversely affect them.
1982
Other options relating to passports were also considered. These included targeted
messages within the renewal application process, requesting an alternate contact
person for all borrowers renewing their passports, or posting tailored letters with the
renewed passports of borrowers in default.
Act
These options were found to be poorly targeted or ineffective, adding little when viewed
alongside the proposed information sharing agreement with Internal Affairs.
Border restrictions
Overseas-based borrowers may stil retain a connection with New Zealand, such as
friends, family, sporting or business interests, which wil lead them to return to New
Zealand from time to time. In Budget 2012 a new data matching programme was
introduced which would alert Inland Revenue when a borrower with high levels of
default returned to New Zealand. New Zealand Customs would send Inland Revenue
the borrower’s arrival card so that contact could be made.
Information
Introducing some kind of border restriction, such as the power to request arrest
warrants, would send a clear message to all borrowers that non-compliance is
unacceptable, and would provide greater leverage over those who temporarily return
to New Zealand.
To be effective, such a measure would need to include education for borrowers on the
Official
possibility of being stopped at the border. This would deter borrowers from non-
compliance at an early stage.
The advantage of border restrictions is that it is a precision measure that can be
the
targeted and applied to the worst cases of default while providing an incentive to the
wider group of borrowers to remain compliant.
While a serious step, raising Bill of Rights concerns relating to freedom of movement,
there is a similar power under the Child Support Act 1991 which has proven effective
against the most non-compliant liable parents.
under
Under the Child Support Act, Inland Revenue can request the District Court to issue
an arrest warrant for a liable parent who is about to leave New Zealand with the intent
to avoid their obligations. This power is supported by an information match with the
New Zealand Customs Service, which notifies Inland Revenue when serious defaulters
return to New Zealand and what their contact details are. Inland Revenue wil then
contact the defaulter to negotiate repayment, and if the liable parent refuses to comply
and is about to leave the country, a warrant for their arrest can be requested.
Introducing similar provisions to the Student Loan Scheme Act would send a clear
Released
message to all borrowers that non-compliance is unacceptable and that there are real
consequences for ignoring repayment responsibilities. This new sanction would be
19
supported by a communications campaign to ensure that borrowers understood the
potential consequences of non-compliance.
Inland Revenue’s experience is that the threat of arrest at the border has a significant
effect on defaulters’ attitudes towards compliance. Very few student loan defaulters
are expected to risk arrest for the sake of avoiding their obligations. While student loan
obligations are a financial burden that some borrowers may wish to avoid, the factors
that can motivate entrenched child support default (i.e. custody and marital disputes)
are not present in a student loan context.
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For the small number of borrowers who remain non-compliant once the arrest warrant
has been issued, Inland Revenue would request information from airlines under
section 17 of the Tax Administration Act to determine which flight a borrower is booked
Act
on. This information would be provided to Police stationed at the airport who would
have to locate the defaulter before they boarded their flight. Police have advised that
as this would have to be achieved without photos, often in large crowded areas, this
could be difficult and time consuming.
Once the borrower is located at the airport Police would make a judgement as to
whether to execute the arrest warrant or not. It is important for Police to use their
discretion and the decision to make an arrest may have consequences for other
passengers, the airline and airport security. It may not be appropriate, for example, to
arrest a single adult accompanying a young child if adequate arrangements cannot be
made for the child. If the borrower’s bags have already been loaded then the
consequences of delaying the flight would be taken into account. It is proper that
Information
Police make these decisions as they are in the best position to assess the potential
impacts of an arrest.
This proposal may have the appearance of the Police acting as debt collection agents
for Inland Revenue. If enacted it would be made clear that police would only act as
independent officers of court and execution of these arrest warrants would remain at
constabulary discretion.
Official
This proposal would have cost implications for Courts and while the number of
expected arrest warrant requests is low the exact number is unknown and the costs to
Courts have not been estimated.
the
This is a precision measure that can be targeted and applied to the worst cases of
default while deterring the wider group of borrowers from not complying. As hardship
provisions are available to those who cannot afford to pay, this sanction wil only apply
to those who could pay but refuse to do so. The child support border restrictions
provide a precedent that could be leveraged to potentially reduce the costs of
under
implementation.
Legislative amendments would be required for this initiative. The sanction could apply
from the date of enactment, however officials recommend delaying implementation
until 1 July 2013 so that borrowers who have already made travel plans can address
their arrears.
Option 8 - Information sharing agreement between Inland Revenue and Internal Affairs
An ongoing information sharing agreement between Inland Revenue and Internal
Released
Affairs to collect quality contact details of overseas-based borrowers would support the
prevention and collection of student loan default. An information-sharing match of this
nature could also be used to collect contact details for liable parents living overseas
20
who have child support obligations. This process would not require any substantial
systems development or testing.
The lack of quality contact details continues to make it difficult to educate borrowers or
take enforcement action. Inland Revenue needs reliable and sustainable sources of
contact information in order to prevent and address non-compliance.
Borrowers applying for passport renewals provide their contact details to Internal
Affairs. These contact details are likely to be extremely accurate as the applicant is
1982
relying on them to receive their passport or to respond to any questions that arise
during the renewal process.
Act
In 2012 Inland Revenue made a request to Internal Affairs under section 17 of the Tax
Administration Act for the details of all passport renewal applications made in the
previous three months. This request was made so that the passport renewal process
could be evaluated as an on-going source of contact information.
The records were received in early July and were matched against Inland Revenue’s
files to identify those applicants with student loans. Of the 134,000 renewal
applications received over the three month period, 15,927 were identified as student
loan borrowers. Of that group 2,938 were overseas-based borrowers, with
approximately 50% (1,424) having an overdue repayment obligation. These borrowers
had total loan balances of $83 mil ion, of which over $10 mil ion was in default.
Information
The contact information received from the match records was provided to the Inland
Revenue debt recovery team who used the new information to make contact with the
overseas-based borrowers. Based on the results of the test match and the subsequent
collection activity, officials have projected what the impact would be if the match were
in place for a full year. The following projection assumes a median loan default of
$4,541 and 5,600 successful matches per year
Official (1,400 matches per three-month
period):
• $12.5 mil ion from 2,750 borrowers would be collected
the
• $3.5 mil ion from 750 borrowers would be considered for further enforcement action
• $0.5 mil ion from 120 borrowers would be added back to the loan due to hardship.
The projected amount for enforcement action is the total amount of default that would
be considered for more intensive treatment. It is expected that a portion of these cases
under
will not be suitable for further action and of those selected, some wil be unsuccessful.
Collection of child support liabilities across international borders is also a significant
and complex activity that presents a number of challenges; in particular the time and
difficulty associated with locating liable parties offshore due to a lack of quality contact
details. As at 30 September 2012, total child support debt (including penalties) was
$2.5 bil ion, of which more than half ($1.36 bil ion) was owed by liable parents living
overseas. While the reciprocal agreement with Australia covers $408 mil ion of this,
the remaining $956 mil ion is either not covered by the reciprocal agreement or is owed
Released
by liable parents living outside of Australia.
21
link to page 76
There is no long-term, low-cost source of high-quality contact information for liable
parents while they are based overseas. This is considered a key integrity issue.
The 134,000 records received from Internal Affairs have been reviewed to determine
potential matches against child support debtors. 615 cases have been matched
against liable parents living overseas, of which 447 are in default with a value of $17.4
million.
The constraints on using the test match information has meant that the contact details
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that were matched against these liable parents could not be used to pursue the
outstanding amounts. Even without this verification, officials are confident that
collecting these additional addresses and contact numbers would have a positive
Act
impact on the child support debt book.
Option 9 – Remove student allowance eligibility for people in student loan default of
more than $500 for over one year.
Available options would remove student allowance eligibility for those who have an
overdue student loan repayment obligation of $500 or more, where some or all has
been overdue for one year or more, while their overdue repayment obligation remains
at $500 or more.
It is reasonable to expect that borrowers in serious default should not continue to
receive government support through a student allowance. Al owing serious
Information defaulters
to continue to receive such support is inconsistent with Government's focus on
improving student loan collection and changes to eligibility of defaulters for loans (from
7 February 2013, those in default of over $500 for one year or more wil not be able to
borrow for fees or living costs, until the default is reduced to less than $500
10).
This option wil not result in savings, however, it wil send a clear message about
Government expectations and align with changes already made to loans. Borrowers in
Official
serious default on their student loan should not continue to receive a student allowance
and this is inconsistent with Government’s focus on improving student loan collection.
As with eligibility for student loans, a defaulter who made an instalment arrangement
the
would become eligible again, and Inland Revenue has advised that approximately 90%
of allowance applicants may qualify for hardship. This reduces potential savings.
Options
Pros
Cons
• Improve targeting to those who intend to
• Those affected would need to
under
remain in New Zealand.
wait an additional year.
• Reduces the risk of providing support to
• Would move student support
Restrict
people who may leave New Zealand and go
out of alignment with the
eligibility
into default.
welfare system and may
based on
• A longer stand-down period wil be more
increase welfare take up.
residency
aligned to similar overseas jurisdictions, for
• The longer the stand-down
status
e.g. the United Kingdom has a 3 year stand-
period the greater the impact
down, and Australia requires citizenship.
on those affected, on welfare
system flow ons and
potentially on immigration
Released
objectives.
10 Financial hardship can be taken into consideration by IR.
22
Options
Pros
Cons
• Ensure that compliant overseas-based
• Not expected to produce
borrowers repay their loans faster.
savings in the short term,
• More compliant borrowers wil make
until compliance improves
repayments that would at least cover interest
significantly.
Adjusting
on their loans.
• If compliance does not
the OBB
• Removes the perverse effect created by
improve, wil increase the
regime
repayment obligations decreasing over time
rate of growth of amounts in
under current rules.
default.
• May increase hardship
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applications and
administrative costs.
• Will have a significant effect on defaulters’
• Wil have a significant impact
attitudes towards compliance.
on those affected.
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• Send clear signal about Government
• Could be chal enged under
Border
expectations to comply with obligations.
the New Zealand Bil of
restrictions • Increases personal responsibility for debt
Rights Act 1990 (BoRA).
repayment.
• May discourage OBBs from
• Would affect only a small number of the most
returning to New Zealand.
non-compliant borrowers.
• Would support the prevention and col ection of • May be challenged on
student loan default.
privacy grounds.
• Could also be used to col ect contact details
• Wil not target borrowers who
for liable parents living overseas who have
either do not have or do not
Information
child support obligations.
travel on a New Zealand
matching
• Would signal that Government expects
passport.
Information
student loan consumption to not exceed
reasonable limits.
• Would not require any substantial systems
development or testing.
Restrict SA • Send clear signal about government
• Would affect very few people
eligibility
expectations to comply with obligations.
with potentially high
for
• Consistent with expectations for student loan
administrative costs.
defaulters
borrowers.
Official
Option estimates summary table
the
Improving repayments from overseas-based borrowers and increasing personal responsibility for
debt repayment*
under
Released
23
Part of
Options
Preferred
Policy
Recipients
problem
option(s)
savings
affected (average
addressed
initial
pa)
estimates (4
years net)
Reduces high
Option 1 – Status quo
5. Increase the
5.
5.
risk spending
PR stand-down
a. ($36.84m)
a.960 SA and
/ borrowing
Option 5 –
Increase the PR to
SA and
1,300 SL
Improving
stand-down for loans and
a. 3 years
($12.50m) SL
repayments
allowances to
b.2,880 SA,
SL not
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from
a. 3 years or
Option 6 –
b. ($110.50m)
progressed
overseas-
b. 5 years
increasing OBB SA –
SL not
based
repayments
progressed
c. 938
borrowers
And/or –
c. Remove SA eligibility
Option 7 –
c. ($30.50m)
Act
Increasing
from PRs aged 55 and over
6. 61,200
extend child
personal
support border
responsibility
Option 6 – increasing OBB arrest system to
6. ($0.00m)
7. Smal number of
for debt
repayments
student loan
the most non-
repayment
7. ($0.00m)
compliant
Option 7 – border
debtors
borrowers
restrictions/passport
Option 8 – info
8. ($0.00m)
Option 8 – info matching
matching
8. Will potentially
9. ($0.95m)
impact up to 12,000
Option 9 –
Remove SA
OBBs and 2,500
eligibility for those in default
liable parents
on their SL
9. 35
Information
*Savings estimates do not include administrative costs, or other flow on costs (such as debt impact)
Consultation
The Ministry of Education, the Inland Revenue Department and StudyLink developed
these proposals. The Ministry of Social Development, the Treasury, and Inland
Official
Revenue have been consulted on the proposals in this paper. The Ministry of Justice
has been consulted on the student allowances proposals and the arrest warrant
proposal.
the
The New Zealand Police and New Zealand Customs Service have also been consulted
on the arrest warrant proposal. The Department of Internal Affairs and the Office of the
Privacy Commissioner have been consulted on the proposal for the information sharing
agreement between Inland Revenue and the Department of Internal Affairs.
Limited time was available for consultation. We did not consult with sector groups due
under
to the budget-sensitive nature of the proposals.
Human Rights
Ministry of Education legal advice is that, removing access to student allowances for
those aged 65 and over, reducing the life-time entitlement for those aged 40 and over
to 80 weeks, and increasing the student loan and allowances two year stand-down for
permanent residents and Australians raises prima facie issues of discrimination based
on age and national origin respectively under the New Zealand Bil of Rights Act 1990
(BoRA).
Released
If these policies are challenged, it is likely that they wil be found by the courts not to
amount to unlawful discrimination provided evidence can be produced to establish that
24
these measures wil more likely than not achieve Government’s intended goals.
Evidence-based justification arguments, including those set out in this paper, wil be
required.
As these proposals can be implemented without legislation the Ministry of Justice
(MoJ) has not considered them as part of a formal BoRA vetting process. Instead, the
lawfulness of the proposals wil depend on whether the discrimination (if a court finds
it to exist) can be justified under section 5 of the BoRA.
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Proposed changes to the Student Support Schemes
The Treasury advise they support a broad-based tertiary system with a larger element
of private contribution to fund the direct costs of tertiary education. However, given that
Act
Ministers have made it clear that certain measures (e.g. interest on Student Loans) will
not be considered, they recognise that the scope for future savings under current policy
settings is limited to the type of changes outlined in this package.
These incremental changes while generating small savings are likely to have large
impacts on specific groups by limiting their access to tertiary education. For example,
the savings initiatives proposed include incremental changes to the eligibility to Student
Support systems, based on age, and immigration status that limit access to tertiary
education.
Information
Conclusion and Recommendations
The recommended outcomes of the options analysis for each proposal are as follows:
Targeting more tightly on the basis of returns to study and initial years of study and increasing the
contribution that people make to their tertiary education by:
Official
• removing student allowances eligibility for those over a certain age (e.g. 65 years)
•
reducing student allowance lifetime limits (e.g. from 200 down to 80 weeks) for those over a
certain age.
the
Improving repayments from overseas-based borrowers and increasing personal responsibility
for debt repayment by:
• extending the student loan and student allowance stand-down period for permanent
under
residents and Australians from 2 years to 3 years from 1 January 2014
•
adjusting the overseas-based borrower repayment regime, from 1 April 2014 for 2014/15 and
beyond, by introducing:
o a fixed repayment obligation for overseas-based borrowers at no less than the rate
they pay when they leave New Zealand
o additional repayment thresholds for overseas-based borrowers
• making it an offence for a borrower to knowingly default on an overseas-based borrower
repayment obligation so that an arrest warrant can be requested to prevent the most non-
compliant borrowers from leaving the country from 1 July 2013
Released
• putting in place an ongoing information-sharing agreement between Inland Revenue and
Internal Affairs to obtain further contact details from overseas-based borrowers and liable
parents when they renew or apply for their passport.
25
Implementation
Student Al owances
Changes to student allowances, including adjustments to eligibility and entitlement
based on age, and increasing the stand down period for permanent residents, require
a change to the Student Al owance Regulations 1998. Amendments to the Regulations
wil be carried out by the Ministry of Social Development during 2013.
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Student Loans
Amendments to the Student Loan Scheme Act 2011 wil be required to introduce
changes to the overseas-based borrower repayment regime. The application date for
Act
the new regime would be 1 April 2014. Border restrictions require amendments to the
Student Loan Scheme Act 2011 and also require regulations to amend the District
Court rules. The restrictions could apply from 1 July 2013.
The information match with the Department of Internal Affairs wil be introduced
through regulation under the recent Privacy Act 2013. Inland Revenue and Internal
Affairs are working with the Office of the Privacy Commissioner to develop an
appropriate information sharing arrangement. This process requires public
consultation with the representative sector groups. The information match could apply
from August 2013.
Monitoring, Evaluation and Review Information
The Ministries of Education and Social Development wil monitor and review the
student allowance proposals and report to the Minister for Tertiary Education, Skil s
and Employment and the Minister for Social Development. The four agencies involved
with the Student Loan Scheme (Inland Revenue, the Ministry of Social Development,
the Ministry of Education, and the Treasury) wil monitor and review proposals in
respect of the Student Loan Scheme.
Official
The Student Loan Scheme Governance Group wil monitor the overall performance of
the scheme changes, including through the Student Loan Performance Framework
and report to Ministers on outcomes. The framework indicators are reported regularly
to the Minister for Tertiary Education, Skills and Employment and the Minister of
the
Revenue.
under
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26
Document 6
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Document 7
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Document 8
Tertiary Education Report: Additional financial recommendation for
student support Budget 2013 package
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Date:
15 April 2013
Priority:
High
Security Level:
Budget Secret
METIS No: 770066
Act
Action Sought
Addressee
Actions sought
Deadline
Approve the changes to appropriations from Cabinet’s 15
16 April 2013
Minister of Finance
April decision to reduce student allowances eligibility for
students aged 40 and over from 200 weeks to 120 weeks as
part of the student support 2013 Budget package.
Minister for Tertiary
Education, Skills and
Employment
Minister of Revenue
Information
Enclosure: No
Round Robin: Yes
Contact for Telephone Discussion (if required)
Name
Position
Telephone
1st Contact
Official
Julie Keenan
Senior Policy Manager
463 8093
027 504 6210
Ben McBride
Team Leader, Treasury
917 6184
Miriam Urlich
Drafter
463 8708
the
The following departments/agencies have seen this report:
Other:
DoL
IR
MoE
MED
MoH
MSI
MSD
NZQA
NZTE
OAG
Stats
TEC
TPK
Treasury
under
Minister’s Office to Complete:
Approved
Declined
Noted
Needs change
Seen
Overtaken by Events
See Minister’s Notes
Withdrawn
Comments:
Released
Tertiary Group – TEP
1
15 April 2013
Tertiary Education Report: Additional financial recommendation for
student
support Budget 2013 package
Executive summary
1982
This report seeks your approval of the remaining appropriation changes needed to give effect to
Cabinet’s decisions on the student support package for Budget 2013.
Cabinet agreed to the Student Support Package for Budget 2013 at its meeting on 15 April 2013
Act
[a minute is yet to be issued]. The appropriation changes to give effect to this package were
also approved by Cabinet on 15 April 2013 as part of the Treasury Omnibus Budget cabinet
paper.
The appropriation changes for the initiative to reduce student allowance eligibility for students
aged 40 and over to 120 weeks were not included in the Treasury Omnibus paper considered
by Cabinet on 15 April. However, Cabinet delegated authority to you to approve any detailed
changes to the Student Support Package and any resulting appropriation changes.
The financial implications for the initiative to reduce student allowance eligibility for students
aged 40 and over to 120 weeks are as follows:
Information
Operating impact ($ million)
Reduce allowances
2016/17 4 year total
eligibility for those aged
& out-
(2013/14
40 and over to 120 wks
2012/13
2013/14
2014/15
2015/16
years
to 2016/17)
Operating Impact
-
(0.286)
(2.396)
(3.302)
(3.285)
(9.269)
Official
Debt Impact
-
0.520
1.591
1.993
1.685
5.789
The financial implications of the overall student support Budget package, including this student
the
allowance initiative, are:
$91.343 million for the 2013/14 to 2016/17 financial years in operating impact savings
$16.187 million for the 2013/14 to 2016/17 financial years in debt impact savings.
under
We seek your urgent approval of these financial implications and appropriation changes by 16
April 2013, in order to meet Treasury deadlines for Budget 2013.
Released
2
Recommended actions
We recommend that the Minister of Finance, the Minister for Tertiary Education, Skills and
Employment, and the Minister of Revenue:
a.
note that Cabinet has agreed to include the initiative to reduce student allowance eligibility
for students aged 40 and over to 120 weeks as part of the student support Budget package
but that the appropriation changes for this particular change were not able to be included in
1982
the Treasury Omnibus Budget paper considered by Cabinet on 15 April 2013
b.
note that on 15 April 2013, Cabinet delegated authority to you to approve any detailed
changes to the Student Support Package and the resulting changes to appropriations [Note:
Act
a Cabinet minute has not yet been issued]
c.
approve the changes to appropriations for the Budget 2013 initiative to reduce student
allowance eligibility for students aged 40 and over to 120 weeks as set out in the attached
initiative document.
APPROVED/NOT APPROVED APPROVED/NOT APPROVED APPROVED/NOT APPROVED
Information
Andrea Schöllmann
Group Manager, Tertiary Education
Ministry of Education
Official
NOTED / APPROVED
NOTED / APPROVED NOTED / APPROVED
the
Hon Bill English
Hon Steven Joyce Hon Peter Dunne
Minister of Finance Minister for Tertiary Education, Minister of Revenue
Skills and Employment
under
__ __/__ __/__ __
__ __/__ __/__ __
__ __/__ __/__ __
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3
Tertiary Education Report: Additional financial recommendation for
student
support Budget 2013 package
Purpose of report
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1. This report seeks your approval of appropriation changes to give effect to Cabinet’s Budget
decisions to reduce student allowance eligibility for students aged 40 and over to 120
weeks.
Act
Background
2. Cabinet has delegated authority to you to jointly finalise the remaining financial implications
of its 15 April 2013 decisions regarding the Student Support Budget package [Note: a
Cabinet minute has not yet been issued].
3. The attached initiative documents set out the financial implications of this student allowance
initiative for your approval.
4. The financial implications in this initiative are as follows:
Information
Operating impact ($ million)
Reduce allowances
2016/17 4 year total
eligibility for those aged
& out-
(2013/14
40 and over to 120 wks
2012/13
2013/14
2014/15
2015/16
years
to 2016/17)
Operating Impact
-
(0.286)
(2.396)
(3.302)
(3.285)
(9.269)
Official
Debt Impact
-
0.520
1.591
1.993
1.685
5.789
5. The appropriation changes for the other elements of the Student Support Budget Package
the
were considered by Cabinet on 15 April 2013 as part of the Treasury Omnibus Budget
cabinet paper.
6. The financial implications of the overall student support Budget package, including the
initiative to reduce student allowance eligibility for students aged 40 and over to 120 weeks,
are $91.343 million for the 2013/14 to 2016/17 financial years in operating impact savings,
under
with debt impact savings of $16.187 million.
Next Steps
7. We seek your approval of the financial recommendations by 16 April 2013, in order to meet
the deadlines required for Budget 2013.
8. Following your approval, these recommendations will be entered into the Treasury system to
produce the final Budget 2013 documents.
Released
4
Votes:
Revenue and Social Development
Title:
Reducing Student Allowances Eligibility for Students Aged 40 and Over
Description:
The Student Allowance 200 week lifetime limit will be reduced to 120 weeks for
those aged 40 and over for study starting on or after 1 January 2014. Transition
arrangements will apply for some people.
Note the funding implications of reducing the 200 week student allowance life-time to 120
1982
weeks for those aged 40 years or more by vote are:
$ million increase / (decrease)
Act
Vote Social Development
2016/17
and
2012/13
2013/14
2014/15
2015/16
Outyears
Operating balance impact
0.000
(0.468)
(2.943)
(3.977)
(3.860)
Debt Impact
0.000
0.532
1.696
2.296
2.232
No Impact
0.000
(0.108)
(0.339)
(0.457)
(0.445)
Total
0.000
(0.044)
(1.586)
(2.138)
(2.073)
$ million increase / (decrease)
Information
Vote Revenue
2016/17
and
2012/13
2013/14
2014/15
2015/16
Outyears
Operating balance impact
0.000
0.182
0.547
0.675
0.575
Debt Impact
0.000
(0.012)
(0.105)
(0.303)
(0.547)
No Impact
0.000
0.000
0.000
0.000
0.000
Official
Total
0.000
0.170
0.442
0.372
0.028
Approve the following changes to appropriations to reflect the change in the cost of lending and
allowances by vote:
the
$ million increase / (decrease)
Vote Social
2016/17
Development/Minister for Social
and
Development
2012/13
2013/14
2014/15
2015/16
Outyears
under
Departmental Output expenses:
Management of Student Support,
excluding Student Loans (funded
by Revenue Crown)
0.000
0.460
0.000
0.000
0.000
Benefits and Other Unrequited
Expenses:
Student Allowances
0.000
(1.270)
(4.007)
(5.395)
(5.246)
Accommodation Assistance
0.000
0.085
0.262
0.344
0.333
Jobseeker Support and Emergency
Benefit
0.000
0.149
0.463
0.617
0.608
Released
Total Operating
0.000
(0.576)
(3.282)
(4.434)
(4.305)
5
$ million increase / (decrease)
Vote Social Development/
2016/17
Minister of Revenue
and
2012/13
2013/14
2014/15
2015/16
Outyears
Non-Departmental Capital
Expenditure: Student Loans
0.000
0.532
1.696
2.296
2.232
1982
Total Capital
0.000
0.532
1.696
2.296
2.232
Act
$ million increase / (decrease)
Vote Revenue/ Minister of
2016/17
Revenue
and
2012/13
2013/14
2014/15
2015/16
Outyears
Non-Departmental Other Expenses:
Initial Fair Value Write-Down
Relating to Student Loans
0.000
0.187
0.595
0.806
0.783
Total Operating
0.000
0.187
0.595
0.806
0.783
Information
Official
the
under
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6
Document 9
Aide Memoire: Reducing eligibility for student allowances for those 40
and over from 200 weeks to 120 weeks
1982
Date:
18 April 2013
Priority:
High
Security
Budget Sensitive
METIS No: 771073
Act
Level:
File Number ED 30/19/07/02
1. You have requested:
a summary of the fiscal effects of the student allowances Budget initiative to
reduce entitlement for those 40 years and over from 200 weeks to 120
weeks
confirmation of the make-up of those affected, including a split between New
Zealand born and overseas born
copies of the Budget cabinet papers for the tertiary education and student
support packages
Information
a copy of the final initiatives/savings spreadsheet.
Fiscal implications of the student allowance 120 week initiative
2. The financial implications of this initiative are as follows:
Official
Operating impact ($ million)
Reduce allowances
2016/17 4 year total
eligibility for those aged
& out-
(2013/14
40 and over to 120 wks
2012/13
2013/14
2014/15
2015/16
years
to 2016/17)
the
Operating Impact
-
(0.286)
(2.396)
(3.302)
(3.285)
(9.269)
Debt Impact
-
0.520
1.591
1.993
1.685
5.789
3. The appropriation changes required were as follows:
under
$ million increase / (decrease)
Vote Social Development/Minister
2016/17
for Social Development
and
2012/13 2013/14 2014/15 2015/16
Outyears
Departmental Output expenses:
Management of Student Support,
excluding Student Loans (funded by
Revenue Crown)
0
0.46
0
0
0
Benefits and Other Unrequited
Released
Expenses:
Student Allowances
0
-1.27
-4.007
-5.395
-5.246
Accommodation Assistance
0
0.085
0.262
0.344
0.333
Jobseeker Support and Emergency
Benefit
0
0.149
0.463
0.617
0.608
Vote Social Development/ Minister
of Revenue
Non-Departmental Capital
Expenditure: Student Loans
0
0.532
1.696
2.296
2.232
1982
Vote Revenue/ Minister of Revenue
Non-Departmental Other Expenses:
Initial Fair Value Write-Down Relating
to Student Loans
Act
0
0.187
0.595
0.806
0.783
4. The financial implications of the overall student support Budget package,
including the initiative to reduce student allowance eligibility for students aged 40
and over to 120 weeks, are $91.343 million for the 2013/14 to 2016/17 financial
years in operating impact savings, with debt impact savings of $16.187 million.
Characteristics of those student allowance recipients who have 120 weeks or
more of allowance
Information
Key points
5. The data shows that:
44 percent of recipients aged 40 and over who use 120 weeks or more of
student allowance had previously been self employed or wage or salary
workers
Official
980 recipients aged 40 and over use 120 weeks or more
more than a third (37%) of student allowance recipients, in 2012, who have
the
used 120 weeks or more of allowance studied at polytechnics
of those recipients aged 40 and over who used 120 weeks or more of
student allowance there is an even split (50/50) between those with
dependents and those without dependents
the majority (51%) of recipients are studying Bachelor’s Degrees
under
77 percent of recipients aged 40 and over who use 120 weeks or more of
student allowance are New Zealand citizens and 45% are New Zealand born
41 percent of recipients who used 120 weeks or more of student allowance
used between 121 – 140 weeks
70 percent of recipients who used 120 weeks or more of student allowance
used 160 or less.
Released
Table 1: Prior activity of students with SA in 2011 who were aged 40+ and had
previously consumed more than 120 weeks of allowance
Wage
House
Non-
or
person or
employed or
Other And
Self-
salary
retired
beneficiary
Unknown
Overseas
employed
worker
ALL
Age 40+
N
105
169
193
82
117
315
980
120weeks+
%
11%
17%
20%
8%
12%
32%
100%
Notes:
1982
(1) The prior activity data is taken from the first year of the current period of study. For example if a
person studied in 2008-2011 continuously but not in 2007, then the prior activity is from the 2008 year.
Table 2: Breakdown of student allowance recipients in 2012 who have used 120 weeks
Act
or more of allowance
Used more than 120 weeks
Recipient profile
N
% of total
Gender
Females
579
59%
Males
398
41%
Age
40 to 44
284
29%
45 to 49
287
29%
50 to 54
210
21%
55 to 59
129
13%
Information
60 to 64
70
7%
Ethnicity
European/Pakeha
288
29%
Māori
125
13%
Asian
407
42%
Pasifika
47
5%
Multiple + Other
110
11%
Official
Residency
Citizens + Cit by birth 746
77%
Permanent Residents 223
23%
Refugees
8
0%
the
Provider
Polytechnics
362
37%
Universities
207
21%
Wānanga
225
23%
PTE&OTEP
152
16%
Schools
31
3%
under
Level of study
Bachelor’s degrees
499
51%
Diplomas 5 - 7
134
14%
L4 Certs
128
13%
L1 – 3 Certs
169
17%
Schools + unknown
47
5%
Dependents
With dependents
509
50%
Without dependents
468
50%
*Total count is 2,447. This is updated from yesterday’s estimates based on more accurate method of
Released
data extraction. Postgraduate qualification codes have been removed from this data set.
6. Table 3 breaks down residency status to show country of birth. This shows that
only 45% of the people affected were New Zealand-born.
Table 3: Residency status of those who have 120 weeks or more
Residency status
% Recipients
Citizen by birth
45%
Citizen
32%
Permanent Resident
23%
Refugee
1%
1982
Total
100%
7. Table 4 gives a distribution of weeks with allowances.
Act
Table 4: Distribution weeks with allowance (for student allowance recipients, in 2012,
who have used 120 weeks or more of allowance)
More than 120 weeks
Weeks with allowance
N
%
121 to 140
413
42%
141 to 160
275
28%
161 to 180
189
19%
181 to 200
100
10% Information
Total
977
100%
The tertiary education package
8. Attached are copies of the final Tertiary Education Package and Student Support
Package cabinet papers and a copy of the final spreadsheet.
Official
the
under
Andrea Schöllmann
Group Manager, Tertiary Education
Ministry of Education
Released
Final package
Savings initiatives with spread of cost of lending $18.8m per
4-year
year
2012/13
2013/14
2014/15
2015/16
2016/17
5-Year Total
total
Remove eligibility to student allowances for over 65s
-
-0.135
-1.889
-2.837
-3.107
-7.968
-7.968
Science and Mathematics Scholarships and School Achiever Awards
-0.750
-0.750
-0.750
-0.750
-0.750
-3.750
-3.000
Cost of Lending Change (costed spread between years)
-18.800
-18.800
-18.800
-18.800
-18.800
-94.000
-75.200
1982
Increasing the 2 yr standdown for Permanent Residents for loans and
allowances to 3y
-
0.380
-2.425
-7.036
-9.608
-18.689
-18.689
Restrict allowances for over 40s by lowering weekly lifetime cap to
Act
120 weeks
-
-0.286
-2.396
-3.302
-3.285
-9.269
-9.269
Admin costs - IR and levels 1&2
0.402
4.289
0.130
0.132
0.132
5.085
4.683
Subtotal
-19.148
-15.302
-26.130
-32.593
-35.418
-128.591
-109.443
4-year
Spending initiatives
2012/13
2013/14
2014/15
2015/16
2016/17
5-Year Total
total
BPS - level 4+: extending unfunded over-delivery
-
5.648
9.534
8.874
8.329
32.385
32.385
Information
Centres of Research Excellence
-
0.500
3.169
3.169
3.169
10.007
10.007
Tertiary Equity Funding
-
0.640
1.478
1.881
2.297
6.296
6.296
Skills for Canterbury Contingency
-
15.000
-
-
-
15.000
15.000
Increased funding for engineering
-
1.270
2.590
2.690
2.790
9.340
9.340
Increased funding for science
-
2.525
5.075
5.125
5.175
17.900
17.900
Official
Increased funding for Private Tertiary Establishments
-
4.100
8.200
8.200
8.200
28.700
28.700
Subtotal
-
29.683
30.046
29.939
29.960
119.628
119.628
the
Subtotal - all initiatives
(19.148)
14.381
3.916
(2.654)
(5.458)
(8.963)
10.185
4-year
under
2012/13 2013/14 2014/15 2015/16 2016/17 5-Year Total total
Spread of cost of lending savings at MBU
-41.900
-33.900
-18.000
-7.400
-0.800
-102.000
-60.100
Final student support savings package with MBU spread of cost
of lending savings*
-42.248
-30.402
-25.330
-21.193
-17.418
-136.591
-91.343
*As reflected in Additional Financial Recommendations for student support Budget 2013 package. Student support only (Science and Mathematics
Scholarships
savings not included)
Released
1982
Act
Information
Official
the
under
Released
Document 10
Aide Memoire: Impact of Budget 2012 and 2013 student allowance
initiatives on student allowance expenditure
1982
Date:
24 April 2013
Priority:
High
Security
Budget Sensitive
METIS No: 772920
Level:
File Number
Act
1. You have requested:
a graph showing the effects of the Budget 2012 and Budget 2013 student
allowances changes on student allowance expenditure, together with a
forecast in the absence of the Budget 2012 and Budget 2013 changes.
2. Changes made to student allowances in Budget 2012 were:
Removing eligibility for postgraduate qualifications and Long Programmes.
Maintaining the parental income threshold without CPI adjustment until 31
Information
March 2016.
3. Changes to student allowances included in Budget 2013 are:
Reducing student allowance entitlement for those aged 40 and over to a
maximum of 120 weeks from 1 January 2014.
Removing student allowance eligibility for those aged 65 and over from 1
Official
January 2014.
Extending the current stand-down period for student allowances for
permanent residents (including Australians) from 2 years to 3 years from 1
the
January 2014.
4. The requested graph is provided, and uses forecasts from BEFU 2013.
5. Officials have also provided the same graph depicting the effect on numbers of
student allowance recipients.
under
Andrea Schöllmann
Group Manager, Tertiary Education
Ministry of Education
Released
Impact of Budget 2012 and Budget 2013 policy initiatives on the Student Allowances forecast baseline
Shown as Gross Expenditure
STUDENT ALLOWANCES
Gross expenditure, $M
$800
Where we would be if we
hadn’t removed postgraduate
1982
allowances and frozen the
parental income threshold in
2012
$700
Act
$600
$500
Information
Where we would go
without the Budget
Where we are going
2013 initiatives
with the Budget
2013 initiatives
$400
Official
$300
the
$200
under
$100
$0
1
2
3
4
5
6
7
8
9
0
1
2
3
4
5
6
7
Released
00/0
01/0
02/0
03/0
04/0
05/0
06/0
07/0
08/0
09/1
10/1
11/1
12/1
13/1
14/1
15/1
16/1
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
Actual
BEFU 13
Without Budget13
Without Budget 12 and Budget 13
Shown as numbers of recipients
STUDENT ALLOWANCES
Number of recipietns
120,000
1982
Where we would be if we
hadn’t removed
100,000
postgraduate allowances
Act
and frozen the parental
income threshold in 2012
80,000
Where we would go
without the Budget
Information
2013 initiatives
Where we are going
with the Budget
2013 initiatives
60,000
Official
40,000
the
under
20,000
0
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
Released
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
Actual
BEFU 13
Without Budget13
Without Budget 12 and Budget 13
1982
Act
Information
Official
the
under
Released
Document Outline
- 1175275 - Petrowski - Documents In Scope.pdf
