Graduate debt? Do a runner . . .

Stuart Dunn finds that, after 15 years of charging tuition fees, New Zealand faces a brain drain

In New Zealand, the people have had a decade and a half to think about charging university tuition fees to students. The system was introduced in 1990 and the verdict of Kate Sutton, the 23-year-old president of the Auckland University students' union, is succinct: "No one thinks it has worked. But no one has a better idea." Sutton now faces more than 15 years of repaying what she owes. "I want to be able to do happy things with my life," she says. "I don't want all of this."

Yet Sutton counts herself lucky. Her humanities degree came relatively cheap, at roughly NZ$3,500 (£1,320). A degree in medicine or dentistry could have lan-ded her as much as NZ$70,000 (£26,400) in the red. In 2003, a New Zealand University Students' Association report found that the most indebted student in the country owed an eye-popping NZ$179,732 (£67,800). Some, including Sutton, wonder if the NZ$7bn owed under the student loan scheme will ever be recovered by the government.

New Zealand's fees, like Britain's, were capped at first. Deregulation, allowing universities to charge what they liked, swiftly followed. According to the students' association, the charges rose by between 10 and 15 per cent a year throughout the 1990s. This led, says the national co-president Fleur Fitzsimons, to student debt "spiralling out of control". Only since 2000 has the government managed to keep fees down somewhat by increasing subsidies to universities that make only limited increases.

Now, New Zealand faces brain drain. A survey last year by the New Zealand Herald found that one in three under-graduates plans to seek work overseas immediately after graduation, and that 66 per cent intend to leave the country by the age of 30. True, Kiwis have always loved to travel - many see the "overseas experience" as an essential part of their personal and professional development - but the question now is how many of these graduates will ever return home. The 2003 students' association report found "a clear link between going overseas and student loan debt, as non-resident borrowers have significantly higher average student loan debt than resident borrowers".

One Kiwi now living in London said: "The only option if you have a brain in your head is to move. Why would you stay in a country where even after, say, five years in your profession, you would still not be making as much as, say, a labourer in Australia?" There was "no chance", he added, "of paying off your loan within a somewhat normal time-frame". His own loan, he said, would "never be paid".

This man insisted that he was in favour of fees and had not moved because of the repayments but Kerrie Fenton, a 31-year-old Otago graduate, said that the fees had definitely been a major consideration for her. "The whole education thing's an investment," she said, "and somebody's got to pay for it, but the fees are putting a lot of people off going to university." She had intended to pursue postgraduate study at home, but the returns didn't justify the investment. "We will end up with a whole generation that isn't properly educated," she said.

There is no doubt in Fitzsimons's mind "that fees have been a disaster for all New Zealand students and their families". As Joseph Randall from Auckland University says: "Why would the UK want to follow what we've done here? You have such a rich and long history of tertiary education. Why follow us?"

Most bright young New Zealanders now accept that tuition fees, like death and taxes, come to everyone. But does charging deny access for the most disadvantaged? No, it doesn't. As Tony Blair himself told BBC2's Newsnight last year, New Zealand is an example of a country that has increased university participation despite the introduction of fees. Students can borrow the cost of their education through a student loan scheme. They repay after graduation only when they hit a salary threshold of just over NZ$16,000 (roughly £6,040). So anyone can go to university so long as they have the grades and they are willing to borrow money - big money in some cases, and at commercial rates - to do it.

Many of the effects are intangible. "We're getting by," says Sutton. "Students aren't starving in the streets in New Zealand, but the effects are filtering through. People are being put off marriage. And how do you save for your old age if you're paying 10 cents in the dollar towards your loans?"

Other concerns include the intention (and ability) to buy a house and to start a family. Professor Ian Pool, an emi- nent demographer at the University of Waikato, has described the fees as "one of the most anti-natalist policies ever introduced by a New Zealand government".

There is also a sense of unfairness, a feeling that the intergenerational contract - you pay for our education; we pay for your pensions - has been broken. One student told me she found it "abhorrent" that Helen Clark, the prime minister and an ex-Auckland lecturer, had enjoyed a free university education, but was now hitting the present generation with charges.

Kiwi students may console themselves that the fees they pay at least represent an investment in their future. Is it a wise investment, however? New Zealanders, like Britons, need a degree to secure nearly any professional job, but a flagging New Zealand dollar has depressed professional salaries. Conor Roberts, a 24-year-old political studies student in his third year at Auckland, says: "If you go to a business and ask for a loan, saying you have an idea that will make them money, but you won't tell them what the idea is or how much it will make them, they'd tell you to sling it." Why, he asks, should students be expected to make a leap of faith of the same sort?