Lack of allowances increases borrowing by postgraduate students

Mar 20, 2018

As of 2013, New Zealand tertiary students studying towards postgraduate qualifications other than Honours were no longer eligible to receive student allowances.

Now Isabelle Sin, a Fellow at Motu Economic and Public Policy in New Zealand, has studied the impact of this change and found the only salient effect was that postgraduate students who lost eligibility for student allowances were more likely to take out student loans.

Students who would have received allowances had the policy change not occurred are the only ones expected to have been directly affected by the policy change.

“Although receiving an allowance was never as common among postgrad students as among undergrads, around 16 percent of postgraduate students lost allowances due to the policy change,” said Dr Sin.

The percentage who lost allowances ranges from 25 percent of Master’s students to 2 percent of Postgraduate Certificate students.

“Among students whom we predict would have been eligible for allowances prior to the policy change, the percentage who borrowed on their student loans for living expenses increased from 35 percent to 50 percent,” said Dr Sin.

In contrast, students entering affected postgraduate qualifications who were unlikely to have been eligible for allowances did not increase their borrowing for living expenses. Similarly, students entering Honours did not substantially increase their borrowing for living expenses regardless of their eligibility for allowances.

“These comparisons show that the increase in borrowing by those students who would previously have qualified for an allowance was likely to be caused by the policy change and not by other factors such as changing economic conditions,” said Dr Sin.


Getting to this understanding was challenging, however, as the researchers needed to identify which students would have received allowances if the policy change had not occurred.

“We looked at how much students borrowed for fees. If a student borrowed above the median for fees, our statistics indicated that they would likely have received an allowance had the policy change not occurred,” said Dr Sin.

The researchers showed these students were much more likely to borrow to pay for living expenses after the policy change, meaning they now face larger student debt.

The research didn’t find that the removal of student allowances for postgraduate students clearly affected:

  • the proportion of Bachelor’s graduates who went straight into affected postgraduate study, either overall or within any age group;
  • the total number of students who entered affected postgraduate study;
  • students’ choices between part-time and full-time enrolment;
  • the pre-entry wages of students (as we would see if low-income people were discouraged from enrolling);
  • student loan borrowing for compulsory fees;
  • the amount of paid work students performed while they were studying; or
  • the rate of dropping out in the first year of postgraduate study.

“However, we cannot rule out policy effects in these areas that our methodology and data were not sensitive enough to pick up,” said Dr Sin.

The research uses data from StatsNZ’s Integrated Data Infrastructure from 2006 until 2015 on tertiary enrolment, student allowance receipt, and student loan borrowing by domestic students, combined with additional information such as wage earnings.

Isabelle Sin, Eyal Apatov and David C Maré’s paper “How did removing student allowances for postgraduate study affect students’ choices?” [link] is now available on the Motu website.

Summary haiku

Postgrad allowance
Removed. Students borrow more.
Not much else changes.