The leftward and other blatherings of Span (now with Snaps!)

Wednesday, March 28, 2007

9 Billion is an awfully big number

And so the day has come to pass - NZ's students (and ex-students it should be noted) will owe over $9 Billion at some point today*.

I remember when I was a student activist and the balance was heading rapidly towards $3B and we just couldn't get our heads around the size of the debt. Now it is three times that.

My impression is that Labour is comfortable about it, and they think the electorate is comfortable about it too. There is a new consensus around tertiary education, as everyone in Parliament, except the Greens, seems to be of the opinion that tertiary study is a privilege, and one that must be paid for. This makes me sad.

If the electorate is now resigned to tertiary fees, this doesn't seem to hold true for restricting access to student allowances. Repeated surveys, over many years, have shown high levels of public support for a universal student allowance. It still seems bizarre to me, 11 years after I first became politically active because of these very issues, that students are the only group of NZers who can't access some level of income support if they need it. Instead they are judged on their parents' income, until the arbitrary age of 25, and must borrow to meet their living costs if their parents are considered too wealthy and they cannot meet their needs through other means.

According to NZUSA figures, around a quarter of students under 25 receive some level of allowance support, despite the fact that they can get a payment, of diminishing size, if their parents earn under $72,000. This tells me that the bulk of those studying are still the rich(ish), and that is a problem, for both our now and our future. It seems tertiary study and training are still not seen as an option for those outside the middle and upper classes, and that should worry us all.

Is it realistic to expect parents to support their adult children? Particularly as wage growth in the last twenty years has not met inflation and the size of mortgages and rents has increased dramatically? So many students take up the offer of a student loan, for living costs as well as fees, because they aren't getting support from their families and they simply cannot earn enough to live off and still study at the same time.

And of course there's the impact of the student loan after the degree or diploma is gathering dust in the back of a cupboard somewhere. Most of my friends are unlikely to buy a home anytime soon. That choice is constricted for many by significant student loans. Of the contemporaries I know who have been able to get on the mortgage treadmill it has often been due to a windfall - an inheritance, family support, the good luck of a lotto win. And of those who have repaid their loans, many have had to go overseas to do it.

The social impact of student loans is yet to be fully realised. Certainly the scheme is a lot better than when it was first created, but Labour** has not made the real moves necessary on fees and allowances to reduce the need to borrow in the first place. Until it does that $9 Billion will continue to multiply and become even less possible to address.

* NZUSA's handy debt counter hasn't quite ticked over to $9,000,000,000 yet, but it is very very nearly there. If I was really masochistic I could sit here and watch but alas there is work to be done.
** And again I keep thinking, "but National would be worse, so whatcha donna do?"


Chris said...

Jordan has made an interesting point about the Student Loan Scheme in that it is not, in effect, a loan scheme any longer, although it is still presented that way.

Let's say, for arguments sake, that the government abolished the loan scheme and agreed to fully fund tertiary institutions so that they charged no fees. Let's say they paid for this with a 'graduate tax' paid by those who attended said tertiary education for a specified period depending on how long they studied, what they studied etc. The cost to the govt would be $0, or possibly even less given the admin cost of the loan scheme would be gone and the new system would be easier to administer! But the graduate would be no better off...

"Repeated surveys, over many years, have shown high levels of public support for a universal student allowance" - Indeed, repeated surveys have also shown a lot of support for tax cuts in recent times... The real question is what people answer when asked to choose between tax cuts/paying more tax and increasing public spending. Polls show people would be happy to forgo tax cuts/pay more tax, but they didn't exactly vote that way in 2005 (given only Labour and the Greens were saying they wouldn't cut taxes).

"This tells me that the bulk of those studying are still the rich(ish), and that is a problem, for both our now and our future. It seems tertiary study and training are still not seen as an option for those outside the middle and upper classes, and that should worry us all" - I agree with this in part, but not fully. Some people choose not to apply for the allowance they are entitled to because of the impact this has on their earnings from employment (ie. they could be no better off). The student population is also becoming more part-time. And there are growing numbers entering on-the-job training programmes which do not have fees and which they get paid a salary to complete.

Span said...

Chris, your analogy that surveys showing support for tax cuts are equal to surveys showing support for universal student allowances is false. Public support for univeral allowances has been around since allowances became means tested (i.e a long time now) and has regularly been supported by over 70% in surveys. Tax cuts have only really been on the political agenda in a real sense in the last four or five years, imho, and I think you would struggle to find consistent support for tax cuts at the same level as the consistent support for a universal student allowance.

As for the graduate tax argument, I've addressed this over on Jordan's post - it isn't a graduate tax because not all graduates have to pay it. Only those who didn't have the funds to pay for their fees upfront and/or had to borrow for rent, food etc pay your so-called graduate tax. How is that equitable? How is that a proper tax?

Yes there are some people who don't pick up their allowance entitlement. And yes more people are studying part time. But still only 25% of those under 25 get an allowance. Your points don't account for the vast number still not getting an allowance, despite Labour's pledges to increase access...

Heine said...

Just to beg the questin Span, how would National be worse?

Since Labour changed the law mking it interest free the loan amount has ballooned and repayments have decreased at alarming rates.

If National was in now, and inherited this killer debt I suspect many lefties would be marching like they used to accusing National of all sorts of nonsense. Since Labour has got in, it seems the left wingers are reluctant to call this debt as it is.

Span said...

To take your points in reverse order,

I'm certainly not unwilling to call the debt what it is, and plenty of lefties I know are of the same opinion. The Alliance has a release on this very topic here:

Evidence is a nice thing Clint. As you already know, I tend to not believe you without it.

National would be worse because I doubt they would have put in place the restrictions on fees that Labour has and I find it hard to believe they would have done the interest free loan thing either. It will be interesting to see if National's tertiary policy going in to 2008 is to repeal these two factors or not. Time will tell.

Heine said...

Ah so you DOUBT it, without fact, nor figures to prove otherwise.

So it is based on pure hypothesis?

And this is credible how?

I read in the Dom last May about the IRD figures showing that voluntary repayments dropped by over 65%. Can't find a link for it, but it wasn't exactly a proud moment for Labour.

I would of thought you, or all people, would be scathing of this debt reaching this high. Labour are pretending its ok, and yet if National was in Govt you would be on the streets furious at this high debt.

Anonymous said...

72K is two parents earning 36K each. Thats not much.
To get a full allowance ($150ish) you need your parents to be on a combined 39K. that's two parents earning 19.5K.
That's even less

Span said...

Ah Clint, I'm not sure how you managed to read my post and come out with the opinion that I wasn't being scathing about the appalling size of this debt. Perhaps I need to improve my scathing face.

As to my doubt about National being worse - my conclusion that they wouldn't have brought in interest free student loans or fee increase restrictions is based on the fact that neither were part of National's tertiary policies in 1999, 2002 or 2005.

It's a little difficult to provide facts and figures on a mythical National Government that never actually got into power due to losing the last three elections. Or would you prefer a note from my mother?

Span said...

Anon at 3.32pm today - Yep the thresholds are low. Which begs the question - why do only a quarter of students under 25 get an allowance? Because those from families on low incomes are not going to university for reasons other than access to allowances. This is Not A Good Thing.

backin15 said...

Span, your point about fees is an important one. The loan scheme was not designed to accommodate the level that fees soared to in the early '90s. It's architects based most of their thinking around more modest fee levels that were, at that stage at least, regulated. The re-regulation of fees has improved the situation, however much of the $9b is a case of the horse that bolted.

I share your scepticism about Clint's claims. I understand the major cause of the recent upturn in borrowing to a function of increased enrolments - happy to be corrected on this however.

Span said...

I agree about bolting horses bi15 - the vast majority of borrowers did pay interest, some at very punitive rates for the time and after being heavily encouraged by those administering the Scheme to borrow large.

The interest free thingbo is new, and of course there is nothing to stop a future government from imposing interest again. Not to mention those overseas who are still paying interest.

As far as I'm concerned this debt is still a big problem and it's only going to get bigger.

Heine said...

I think we are all clutching at whats and ifs and possibles... and not facts. Me too, but I don't like to make predictions about something based on my hatred of the Nats.

Span said...

So Clint, you do hate the Nats then? ;-)

Excuse me if I happen to think that National's policy in this area (over several elections) should be taken as a sign-post of what they would do in Govt. Although perhaps given The Hollow Men, I should presume even worse?