Leave me a loan!

Stuart Middleton

EdTalkNZ

19 April 2010

 By and large the sound of the chimes ringing out across tertiary campuses has been replaced bt rhew deafening “katching! Katching!” of cash registers. Have we ever seen the discourse about higher and further education so dominated by discussions about money?

Governments in the western world have only themselves to blame – they let the beast loose through deregulation, through believing that the free market had much to offer in educational markets, through accepting the advice of those who advise that there was great slack in the tertiary sector. Time has shown that institutions of further and higher education are quite capable of rising to these challenges but do governments find the results palatable?

By and large, no, they don’t.

When the baby boomers went to postsecondary institutions they did so on the back of interest-free gifts. Fees were gifted to us, we studied, we passed and failed and we moved on. The qualifications we obtained were by and large respected by the community and needed by the economy. There was little confusion between academic qualifications and vocational qualifications, the difference between a university, a technical institute and on the job training were understood and accepted. And young people got off the formal education train at the appropriate stop to get on with living and making a living.

 So how did we end up in the situation we find ourselves in now, where places are likely to be rationed in all but name, where skill outputs increasingly fail to match the needs of the community, where there are fewer middle point vocational exit points, where there is the shambles of student fees and loans and allowances and where governments with some justification are calling something of a slowing down if not a halt to all this? 

 My view has long been that the drive towards universal participation in higher and higher levels of education reaching out to higher and higher levels of qualifications has at best been a sham and at worse a deception. I will restrain myself by mentioning only once that there is no evidence that this has worked. The only result has been unprecedented disengagement and failure that we should be ashamed of.

 So we talk on and on about money matters in education.

The student fee scheme is failing simply because we fail to ensure a return to New Zealand for the investment. When I embarked on the educational track of becoming a secondary teacher I had my fees paid and was bonded for the same number of years. My “loan” was repaid when I had completed the requisite numbers of years teaching. What was wrong with that?

Furthermore, teachers were required to undertake “country service” at a certain and early point in their career, two years service in a rural community. You could sacrifice salary to forgo this which is what I did for a variety of reasons. What is wrong with such a requirement which might be re-expressed in today’s setting by including experience in low-decile schools in the mix? The gains were always that many excellent teachers responded to the experience by seeing new opportunities in the new settings they were directed towards.

There is no such thing as an interest-free loan. The community pays the interest when the recipient does not. I believe that student loans should be repaid in one or a combination of three ways: paying back the cash by instalments when you are earning, working off the loan in a variety of ways that enhance the system or by paying back a lump sum when there is a wish to withdraw.

This last option might apply when the holder of a loan wishes to leave the country for reasons other than pursuing advanced study. But there should still be a requirement that on completion of the study the student returns or repays. It is a matter at that point of their study being re-financed by the seeking of finance from the private sector. We do this with houses, motor vehicles, cash loans and so on. Where else in society can you get a loan with so few obligations and responsibilities as you can in the student loan scheme? Of course there is no possibility here of mortgagee sales so the possibilities need to be imaginative and fair.This is important because it is the student loans and allowances scheme that has turned the dream of higher education into a nightmare for governments. The cap on student numbers is no more than an attempt to tame the beast. There is some evidence that the prospect of accessing loans and allowances is at least as attractive and accessing further and higher education. Add this to the levels of debt literacy that we are teaching through the schemes and we might have cause to pause.

On another money matter, giving tertiary institutions more control over their assets (they are of course the crown’s assets) on the surface seems like a good thing. It will enable them to get on with development that has been stalled for too long. But will it turn out to be little more than an institutional loan scheme. The benefit to the community is that the money borrowed will probably not come from them directly but from institutional lenders. But who pays? And what returns can the sources of the money seek other than a good financial return.

When governments finance development they have a greater range of options when it comes to returns – public good, savings made through a more highly educated community and income increased through a better performing economy. But those will only occur when they are written into the contract – in other words governments should have a point of view about which developments they finance. What are their clear financial and social strategic goals? How will Development A or Development B contribute? Or should the money flow simply because Oliver Institution says “Please Sir, I want some more.”

Which brings us back to students. Should student loans and allowances be uncritically offered to student regardless of what they wish to do with it? What will be the collateral offered by a student? It can only be a promise, the promise of effective contribution to the community in ways that it respects and needs. That is the best investment of all.