The bizarre financialisation of tertiary education

By   /   October 29, 2015  /   35 Comments

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Let’s imagine a father contemplating his newborn, only too aware that this child is going to cost him a lot of money in the next 25 years

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Reflecting on the past few weeks of student politics around fee increases, two images kept coming up: first the frog in a beaker of water that is getting hotter but the frog does not notice as it is so gradual.  

Thus in New Zealand there was barely a ripple of protest for a 3% rise in fees. In contrast, last week the South African students faced with an 11% rise in fees  got very angry indeed and forced the government to back down. While seemingly small, that 3% increase in New Zealand fees coupled with all the other spending cuts for students since 2008  makes for a significant further rise in the temperature of the water. One day the frog will hop out and cause mayhem.

The second image is that of the snake who eats his own tail.

Let’s imagine a father contemplating his newborn, only too aware that this child is going to cost him a lot of money in the next 25 years

“Son,” he says, “I am willing to invest in you and your potential future earnings.  My kind offer is to lend you the necessary money for your board, food, education and health.  Think carefully, son, is your future earnings potential going to be worth it?”

The baby blinks but agrees, as starvation is not a palatable option.

In the next 25 years, the parents account for every expenditure on the child. The mother also puts in a fee for her unpaid time in caregiving. Unlike many others in a neoliberal world she understands the concept of opportunity cost only too well.

On graduation with a degree that leads to a rather poorly paid teaching job, the student has a large debt and must begin to repay his parents.  However, the student has multiple other debts that were necessary for survival. He is now with a partner, also indebted, lowly paid and newly pregnant. They pay a very high rent to an Auckland landlord.

The loan is sitting on the parents’ balance sheet but is not a very attractive asset. The father thinks “If only we had put all that money into the stock market or Auckland houses how much better off we would be!”  Of course, the parents did not have to borrow for their own upbringing, and they have streaked ahead over the years with well-paid jobs and appreciating assets.  

The opposite is true of their son, whose repayments are preventing a reasonable standard of living and the chance to save for a home. The repayment of the debt merely means money shuffling within the family but at the cost of a huge resentment.   It becomes clear that the parents will end up picking up the pieces in all kinds of ways.  

The penny finally drops. In a moment of lucidity and with a stroke of the pen, the parents wipe the debt. The sky does not fall in, the family pulls together as a unit and the snake stops eating itself.  In 10 years time the family reaps the benefits of getting the son and his partner on their feet.

Last week the Auckland Vice Chancellor argued that if they didn’t raise student fees by the maximum of 3% it would be a permanent loss to the budget every year going forward. There was no empathy for the corresponding compounding effect on student debt.

Student loans are not a very sound investment for the government being income-contingent and interest-free.  The total outstanding student debt is about $15 billion, but it is an impaired asset and has a fair value of only about $9 billion on the Crown balance sheet.

Just as debt forgiveness is often necessary and beneficial within families, we need to work out how to do it as a nation.  It needs a paper transaction that cancels the both the $16 billion debt and the impaired $9 billion asset.

Guess what? The snake stops eating itself, the frog enjoys a lower temperature and we are not all possums caught in the lights of a very bizarre and discriminatory financialisation policy.
Getting rid of the debt is easy. Paying for future education costs requires a sensibly progressive broad-based tax regime where high income earners pay more than now, but students as a group are not singled out for a 12% wallop of tax from ludicously low income.

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About the author

Co-director retirement policy and Research Centre, CPAG management committee

35 Comments

  1. Julz says:

    Thanks Susan – debt forgiveness is the answer for our generation of indebted students. Would this Government or indeed a Labour one ever consider it? They seem to have been happy to only add to the debt….

  2. Gosman says:

    [Gosman, I emailed you a week ago after you requested I contact you. You have not had the courtesy of replying to me nor advising me on The Daily Blog’s message board acknowledging the effort I made to write to you. If I don’t receive an explanation in the next 24 hours why you’ve wasted my time, I’ll be handing out a month-long vacation for you. -ScarletMod]

    • fatty says:

      “advocating for more middle class welfare”

      You need an education if you think education is welfare.

    • Rosemary McDonald says:

      How do we pay for this debt write off?

      Do what Our Leader’s (bear in mind he is one of the state funded educated) American mates did.

      Print money. Quantitative easing. Call it what you will.

      Set a date. All student debt accrued before that date is wiped.

      result….well for goodness sakes, Gosman, work it out for yourself.

      And please, stop conveniently forgetting that most of the parasites warming the benches on BOTH sides of the House got their education for free.

      Good work, Susan.

      • John L says:

        The good thing is you don’t have to pay for an (odious) debt write off. That is why it is called a write off.
        All ebt that is not created for the public good is odious.
        Such as the case with the “student loan scheme”.

        All education should be free.

    • countryboy says:

      @ Gasman . You’d better ask the farmer that question. They’re the ones who earn our export revenue. Not the likes of you. Some pasty money fiddler without an excuse for an opinion .

    • fatty says:

      Susan St John: “but it is an impaired asset and has a fair value of only about $9 billion on the Crown balance sheet.”

      Goshman: “How do you propose to pay for this debt write off?”

      Radio NZ: ‘Economic crime costs up to $9.4bn’ http://www.radionz.co.nz/news/national/257185/economic-crime-costs-up-to-$9-point-4bn

      …and that leaves 400K to get Goshman the special education he needs.

    • Murray Simmonds says:

      GossIDIOT

      I presume YOU are advocating for more corporate welfare. How do you propose to pay for this debt write off?

    • Winnie says:

      Like corporate welfare such as Tiwai Point Gossie?
      Or Movie Welfare like Warner Brothers Gossie?
      Or like Saudi Welfare Gossie? (Oops do bribes count as welfare?)
      Or like Skycity Gambling Welfare Gossie?

      You’re a fucking hypocrite Gosman – so piss off to Whaleoil and get your jollies there you right-wing sucker fish!

    • Gosman –

      “I see you are advocating for more middle class welfare. How do you propose to pay for this debt write off?”

      That didn’t seem to be a problem when Key, Joyce, and other right-wingers of their generation recieved a free taxpayer-funded education, Gosman.

      Once upon a time, we could afford it.

      That’s before seven tax cuts (since 1986) hollowed out the State sector until services we once took for granted are now user-pays.

      But you ask, how can we afford it? Simple; raise taxes. Stop corporate welfare. Tax companies that are currently not paying their fair share; Apple, Google, etc. Implement a Capital Gains Tax. Bloody clever, eh?

      • Susan St John says:

        Raising taxes by increasing the top rate is a fairer way to pay for education than the implicit 12% additional tax from $19000 we have now. Current policy is very harsh on women and low income people who may never reap the benefit of their investment. They do need to house and feed their families.

        • Sam Sam says:

          We already get taxed on education. There called fees. Then again each time money changes hands, there’s that word again, fees.

        • Anabel says:

          I disagree Susan St John.
          Education is not an “investment” it only was though of like that when debt for education was created by the Crown. The Crown profits off the debt of students so it is called an “investment”. With the Crown now actively cutting the work available for these students and talking about raising taxes- well something is amiss.

          Why raise taxes to pay for education?
          Instead if we created our own money and did not borrow from the private banksters with interest we would not need to keep eating our own tail.

          • LilaR says:

            Education is certainly an investment in the sense that society (as well as the individuals who become better educated, and their families) will benefit from being well-educated. Education benefits everyone in the long run, not just those who receive it. Investment is not just a matter of money, despite what the neoliberals would like us to believe.

    • fatty says:

      Please don’t ban our play-thing ScarletMod.

      I enjoy reading Gosman. It’s good for my self-esteem. Gosman makes me feel like a genius.

    • Gosman says:

      I have responded to your comment on this in another thread. I received no e-mail from your good self. Please resend or we can arrange another means of communication.

      [Sent. – ScarletMod]

  3. Jack Ramaka says:

    The Vice Chancellor of Auckland University is on a salary which resembles my telephone number, $300k plus even more I think, can’t be that difficult to run a University with all the staff they have got plus Government funding?

    • Susan St John says:

      “The Vice-Chancellor of Auckland University is the highest paid boss in the public sector.

      A State Services Commission report on remuneration shows Stuart McCutcheon received a pay rise of $20,000 in the year to the end of June, to put his annual salary at between $650,000 – $660,000.

      He is among about 18 tertiary heads who have received a pay rise this year. On average those increases were between $10,000 – $50,000.

      The Tertiary Education Union says the figures are unsettling, given that most university employees have received little or no increases in pay for years.

      The union says the Auckland University vice-chancellor is earning nearly double what the prime minister receives”

      • saveNZ says:

        That’s shocking. No wonder student fees have to go up 3% – management need to cream it off for their exorbitant salary.

        • Susan St John says:

          Actually the VC says it is salary costs

          “At its meeting of 19 October, the University Council resolved to increase domestic student fees for 2016 by 3%, the maximum allowable under current government regulations. While we would all wish to avoid such increases, the University will incur increased costs (mainly staff salary costs) of 3% or $14.5 million in 2016 relative to 2015. The government tuition subsidy will not increase, meaning that the University would have had a shortfall of $14.5 million. The increase in domestic student fees will contribute $5.1 million of this, leaving a shortfall of $9.4 million that will have to be made up through increased efficiencies.

          The Council also agreed to increase international student fees for 2017 by 2.8%. This increase reflects both the increased University costs, as described above, and the need to position the University appropriately relative to our major competitor for international students, the Group of Eight in Australia.

          The Council meeting was held off-campus because the last fee-setting meeting on campus was disrupted by protesters and two staff were the subject of serious assaults. The meeting was relayed back to a public location in the Fale Pasifika so as to ensure that the University’s obligation to allow the public to observe the debate was fulfilled.”

          • Sam Sam says:

            I’m rather sceptical all that will actually reach salaried workers.

            Students debt is an estimated 14 billion. Which makes me doublely sceptical any of that and what is advertised actually reaches salaried workers.

            The numbers actually say teachers hasn’t had a pay increase in real terms for (sarcasm) a thousand years.

  4. Cagey says:

    One man’s middle class welfare is another’s societal investment. It will be paid as usual but will have a better financial pay back than – say – changing the flag for instance…?

  5. saveNZ says:

    Education is a right and used to be free 26 years ago.

    We seem to have plenty of money to give to corporations in corporate welfare.

    Plenty of money to send John Key and lackys to rugby world cup matches and The International Democrat Union (IDU) far right groups that he chairs.

    Millions spent on Grosers ineffectual deal making on TPP – we will sign so the tax payers will pay more for services and then billions lost on paying more for patents and copywrite (i.e. the new digital economy).

    Do people want their money to go back to society or corporations to encourage oil drilling for example with $10 million science grants and $11 million sheep bribes and $43 million propping up media works and millions for sky city real estate deals?

    Because this government believes investing in ‘people’ is a waste of money but investing in real estate and business is what the government believes it should be doing with tax payer money. Does this make sense?

    Under neoliberalism tax payer money is being siphoned to perpetuate inequality at the expense of the next generation to educate themselves and create a healthy society.

  6. roy says:

    No I just can’t support it. As a CEO, I can’t see how this arrangement would guarantee me a second yacht for my summer bach. Did you think of me?

  7. Sam Sam says:

    Forgiving student debt won’t solve the real problem which is the soaring costs imposed by cartels that is failing to prepare students for the economy of tomorrow.

  8. Aaron says:

    I’m already telling my kids to forget about tertiary education if they want a life. I’m encouraging them to take an entreprenuerial approach to making money and to the causes they support.

    My own experience of working for other people was universally bad – I can only imagine how much worse it would have been with a $50,000 loan that would have trapped me in a career I hated.

    Kid’s these days need a ‘job ticket’, they need to be able to think on their feet and fend for themselves – and most of all they need to forget the middle class status system that will surely be the death of a lot of people. Spending several years at a tertiary institution surely isn’t the way to go

    • Brandon says:

      Don’t turn them away from university altogether, it is still worth it for many paths of study e.g Engineering.

    • fatty says:

      “they need to be able to think on their feet”

      That’s an art degree. I’ll never regret mine. It gives me insight into a range of issues and has opened up many doors. I laugh at the stigma associated with it. When people try to give me shit I start talking about social issues, the future and philosophical debates…they soon shut up.

      We need to be encouraging more study is critical academic fields, not stigmatising it further. I’d encourage people to study some things at uni – most of which are outside of STEM subjects. If higher wages is one’s desire then that desire needs to be challenged – just like our cultural, social, economic and educational systems.

      We need to overthrow our educational system and its capitalist values. Let’s not throw away education.

      • Aaron says:

        I agree that there’s a silly stigma about arts degrees (I remember the jokes from when I was at uni) – but I have to disagree that an arts degree will help you think on your feet. Maybe it will help to do that within the confines of universities themselves but not anywhere outside.

        My experience of university was a lot of arrogant young minds who knew a lot of information but lacked the skills to operate in the rest of the world. This is exactly what I was like and most of the people I knew. My natural ability to relate to people has been far more useful to me than what I learned*)

        I’m sure there will be howls of outrage from my peers but that’s hardly surprising, it’s a hard thing to think that all that effort might have been wasted. But I’m not saying we wasted our time, just that it might not be worth the money.

        We can get educated and learn to adopt an intellectual swagger for zero dollars if we really want.

        *Actually my degree may have been exceptionally bad – in my final year a number of student enrolled in an uncredited course at Carrington Polytech to make up for a few gaps in our University of Auckland education!

        • fatty says:

          “We can get educated and learn to adopt an intellectual swagger for zero dollars if we really want.”

          That’s the stigma I was referring to. Whenever the word ‘academic’ or ‘intellectual’ is used in relation to an arts grad, it is sneered at.

          I’m just not interested in making money. I’m interested in creating change. I wish all arts grads thought like that, but they don’t.

          I guess it depends what people study, what their goals are in life and what their values are.

          If at the end of an arts degree you still sneer at intellectual knowledge and your goal is to make money, then I don’t think your education has been very effective.

    • saveNZ says:

      Nope even if you have to pay for a degree it is still worth it! And also do the degree the person wants, not what they thinks marketable.

      Arts is still a very good degree and in my view business and economics is more the waste of time. Best way to learn about business is to start one.

      As for economists – look what a mess they have created with the Chicago school, Paula Rebstocks and the psychology of the likes of Clayton Weatherston. Don’t go there!

  9. JonL says:

    ” Spending several years at a tertiary institution surely isn’t the way to go”
    Well…my older son decided it was the way to go, at 34, got himself a Science degree and is now working at a job he enjoys. Mind you I worry about the $40k or more he probably owes the Gov. more than he does………..and no, Uni wasn’t actually totally free, back in the late 60’s when I went, but, good paying holiday jobs were plentiful – summer at the Freezing Works was normally good for enough for all the top ups, books, fees, (we still had to pay 10%, from memory) and enough left over for a motorbike……..not like now…….

  10. Karen says:

    There is another flaw that I see in the financialisation of education. With student loan being easily granted to students it can be easy to sell a “dream” of a future that will never come to fruition.Lots of training institutions have popped up accordingly. Far more than existed pre student loan fee based education. It is one thing to have a huge debt when future high income employment may help you pay for it, it’s another entirely when that high income employment never comes into reality. Student loans have created a whole other way to make a profit with no accountability to prove that are fit for the purpose of providing for the actual workforce. In days gone by when Government paid we had such things as the amount of nurses or teaches taken into training as were to be needed. In this sense if you were accepted for training you had a job to go to at the end of it because as the Government paid to train people they then had an incentive to work toward reality not being in the business of selling a “dream”

  11. Mike in Auckland says:

    Hearing today that the government and the PPTA have agreed on a 6 percent pay increase over the coming two to three years, I was again thinking, how much we live in a class system.

    Yes there are certain teachers that may be comparatively underpaid for their efforts and qualifications, especially when starting off teaching. But same like university tutors and especially the highly paid heads of departments and administrators, people with tertiary education and degrees do generally have a rather better income situation and living standard than many others do.

    We have various groups demand this and that for what they work for, and what they deliver, and on one end we have staff like nurses still enjoy double time for work on public holidays and during night shifts, and we have meat workers and others, who simply struggle to survive on their pays, for their hard work.

    There is in some middle class professional groups at least as much an attitude of “entitlement” as there is with CEOs and their high salaries, and when beneficiaries dare ask for an increase, all these professionals tend to either ignore them, or frown on them, saying, hey, I had to study for years, I had to work hard, I had to go into student debt, bla, bla, bla.

    So where do we draw the line? Another thing to consider is the open borders we have, some can get a good qualification here and go overseas and earn heaps more than they ever could in NZ. They may never come back and leave their student debt for the rest of society to pay. They may be doing rather well.

    If we go back to lower fees or free tertiary education, we need measures in place that bond the ones that enjoyed the education to staying in jobs in New Zealand. There are also some overseas students getting an education here, and while their parents, or the employers they may have in their countries, or governments, may sponsor or support them to get a degree here, they may suddenly decide to rather stay here and live and work. So all that “investment” in their education does not go back to the ones that invested in them.

    I am all for free education at tertiary level, I just mean, it is not all that simple to resolve the problems, also with student debts. So taxes would need to be higher. And we need to return to wage and income structures where we have more equality, not the present day class structure, where some will always be better off, because their middle or upper class parents gave them some help, or because they could get a degree that enables them to earn a lot more than ordinary workers, so they can then charge us heaps as doctors, psychologists, therapists, lawyers, accountants, technical experts and what else we have.

    Maybe we need a radically different societal order again?