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The loan scheme was set up under Phil Goff as minister of education during the Lange/Roger Douglas Labour regime. The claim at the time was that anything less than market interest rates would disrupt the free market in credit, eg causing students to ‘max out their loans in order to pay down their mortgages’. ACT has made similar claims since.

This ‘logic’ (and I use the word loosely) has not been used anywhere else in the Western world: as a result we ended up with a student loan scheme that even Americans consider draconian (USA has a much kinder federal student loan scheme than ours). Quite how the supporters of market-like interest rates failed to notice that overseas loans scheme don’t hit the problems that claimed were ‘inevitable’ I won’t go into.

The student loan scheme has been tweaked since, but the basic history is that is started draconion so minor changes haven’t yet made a really big difference.

A further complication is that student debt is turning into a major part of the govt’s debt, so lowering interest is now a major budget-shock to the govt. This is the ‘intertia’ problem – the longer the loan scheme goes on, the more is owed by more people, the harder it is to change.

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For those of you who don’t know May Day is a celebration of the social and economic achievements of the western labour movement….

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