How did removing student allowances for postgraduate study affect students’ choices?

From 1 January 2013, students in New Zealand who entered postgraduate qualifications other than Honours were no longer eligible to receive student allowances. We use individual-level administrative data that includes tertiary enrolment information, student allowance receipt, student loan borrowing, and wage earnings to investigate whether the policy affected students’ choices. We use a student’s allowance receipt as an undergraduate or her borrowing for course fees as a postgraduate to proxy for her counterfactual allowance eligibility. We use this proxy to compare allowance-eligible and allowance-ineligible students who enter an affected postgraduate qualification or an unaffected Honours degree. Although we are not able to cleanly estimate the causal effect of the policy, our results do not suggest that the policy affected the number or type of postgraduate entrants, their choice between part-time and full-time study, the amount of paid work they performed while studying, or their rates of dropping out. However, our results strongly suggest that students who became ineligible for allowances increased their student loan borrowing for living expenses.