Otago University was in the same situation as others in New Zealand. It was doing everything it could to increase income and balance the books to avoid staff redundancies, Prof Skegg told a university council meeting yesterday.
"These are testing times for universities. What I am saying is perhaps a little bit of interest [should be added] to student loans... so the Government can fund universities more and we can keep our tuition fees down.
"It is a discussion that needs to happen."
More than 530,000 university and polytechnic students have loans totalling about $10.2 billion. Most students will take more than seven years to repay their loan.
Prof Skegg said the "massive cost" of student loans meant little money was available for other forms of tertiary funding.
He described the situation as "very unfortunate".
"All we can do is maintain our dialogue with the politicians. But I think it is going to be difficult to turn back the clock on interest-free loans, given it was such a vote winner."
The university council yesterday adopted a string of fee and levy increases for most students next year, and introduced a capital development levy of $50 to help fund improvements to student social facilities such as the University Union building.
Otago University Students Association (OUSA) president Edwin Darlow "somewhat reluctantly" supported the increases, which will add $190 to $600 to most Dunedin students' bills next year.
The other student representative on the council, Simon Wilson, opposed the increases, saying they would lead to students increasing their loans.
The capital development levy was "essentially just an additional charge on students" because the university was unable to increase tuition fees beyond the level allowed by legislation, he said.
Prof Skegg agreed.
"We are trying to raise money any way we can... I am determined to maintain the quality of this institution."
The council approved a resolution proposed by Mr Darlow that the university and OUSA work on a joint representation to the Government on the need for more funding for universities "to recognise the imposition on students from increased fees and student debt" and "to avoid students having to shoulder an increasing proportion of the cost of university education".
Mr Darlow said he was happy the bodies had agreed to work together, and that the university was being "more public" about the debts students were facing".
The fees adopted yesterday only apply to New Zealand students. International fees for next year, set in May, will increase by 6.4% to 21.7%.
DOMESTIC FEE INCREASES
• Undergraduate fees to rise by 5% maximum allowed by Government (or less if fees are already at their maximum).
• Almost all postgraduate fees to rise by $500 a student, an increase of 1.9% to 11.7%.
• Fee increases expected to bring in additional $3.7 million next year.
• Welfare and recreation levy to increase by $45 to $284 per Dunedin campus student.
• Introduction of capital development levy of $50 per Dunedin campus student.
• Administration and internet use fees to rise 5%-6.9%.
