by David Clendon
Having just picked up the role of Tertiary Education spokesperson for the Green Party, I was alarmed to hear Otago University Vice-Chancellor David Skegg calling for the Government to reintroduce interest on student loans while students are studying, and using the money to increase funding to Universities.
We know that funding is always tough for tertiary institutions, and I certainly agree that the Government should be supporting the sector and even increasing funding to make sure they are properly resourced. But reintroducing interest on student loans would be a huge backwards step, as the New Zealand Union of Students’ Associations (NZUSA) pointed out.
The removal in 2006 of interest on student loans while students are enrolled in study has lowered the financial barriers to tertiary education, and has made it much easier and quicker for students to repay their loans. Student debt has ballooned to more than $10 billion, and it would be disastrous to take any steps that would speed up the increase.
Coincidentally, I received a cheque in the mail from the IRD about a week ago, a refund for an amount of interest that due to an error was not written off while I was studying. While such a windfall is always welcome, not least of all for being unexpected, it was illuminating to see just how much and how quickly interest builds up on even a relatively modest loan.
Fortunately, the government has indicated, for now at least, that it’s not considering taking up Dr Skegg’s suggestion. But it’s a worry that the idea has even been floated. If they’re looking for ideas about the Student Loan Scheme, they could look at some of the Green Party’s ideas instead. In seeking to pursue our policy of ‘increasing wisdom, decreasing debt’ we would:
- Introduce a debt write-off scheme so that, at the end of studies, each year the person stays in Aotearoa and contributes through paid or unpaid full time work, a year’s worth of debt will be wiped.
- Adjust repayment thresholds to start at a higher income level but introduce higher income bands that attract a higher rate of repayment.
- Suspend all interest for people on low incomes and for primary caregivers.
- Make study costs tax-deductible for students who do not qualify for an allowance.
- Apply zero real rate of interest to student loans (i.e. rate of Consumer Price Index only).
These are all mechanisms that recognise and value both the personal benefits and the public good that comes from maintaining access to a high quality tertiary education.
Published in Economy, Work, & Welfare by David Clendon on Thu, November 12th, 2009
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on the trolls and those who are unable to keep on topic
I just don’t get this, the Greens purport to be a party interested in “social justice” yet they support the elite being subsidised by the working man.
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I agree that there should not be interest on student loans while the student is studying.
I do, however, believe that the amount of subsidization applied to many degrees is far larger than the benefit latter obtained by the country that would not be obtained in the absense of such subsidization. The rate of subsidization has no place being so high, especially given that many graduates then go overseas.
I agree with the debt write of schemme, though the rate should be half a year wiped off for every year in NZ as having the rate set too high does not retain them for long enough to recuperate the costs that are being written off or anywhere near the investment during study. A longer period also encourages them to settle down and thus increases retention, the 2:1 ratio offers this advantage without being so low as to make the scheme ineffective.
I disagree on interest suspension. If they have a university degree and have taken all that money from the state they have no reason to be on a low income unless they have deliberatly put themselves in that position by slacking off in study such that none will employ them or choosing a dead-end degree with no hope of employment other than as a Labour politician.
To apply a zero real rate of interest would actually be a inferior option to that presently offered while studying as the present rate is zero, not zero real, and as such student loans actually decrease in value over time rather than stay the same. When not studying interest has its place, though a decreased rate of interest may be prudent if unemployed and an increased rate if overseas; the debt being able tot be sold to a collection agency should the person be deamed to have not lived in NZ for the last five years or so.
As to the allowence, that we have a no-interest student loan means that we have no need for the allowence as a student can charge it against their latter study. The allowence no longer acts to benefit the poorer students in any way and even if it did the present method of determining entitlement is incredibly flawed. Anything being tax-deductable to individuals is another matter entirely.
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Sapient
So the working man should have to subsidise the educated elite?
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Big Bro,
You, of all people, should be familar with the term ROI.
Education has very real benefits for society and social mobility (which brings further benefits still), particuarly so in relation to the economy and employment. Because there are such benefits it makes sense to encourage participation in education to the point where the marginal benefit of more students is equal to the marginal cost of the subsidy needed to encourage such. At this point the ROI to all of New Zealand is at its peak, at least through the mechanism of fee subsidies or interest subsidy.
The problem is that with people going overseas we do not get the full ROI so we must attempt to retain them. If we were to offer no subsidies at all far less people would take up education and there would be substantially less social mobility.
Though, with a flat tax structure, it wouldint really be that bad to not have subsides as the extra income generated could, like a mortgage, be paid off so long as the pay is decent; and with fewer people coming in it would be. The problem is that fewer people would be retained here because the wages would be unable to be paid and this would ultimately hurt our economic development.
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I would increase fees to deliver more money to universities. But retain interest free fees debt during study.
I would write off (over 10 years – retaining interest free status over the 10 years) debt for those working for the government – doctors, nurses, teachers, scientists etc. This would encourage those who left Enzed to return and have their debt written off – rather than have interest mount up on the unpaid debt.
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I would like to see subsidy rates adjusted relative to demand, or predicted demand, for individuals in those areas. This way the engineer, whom we need, will pay less of their fees than the sociologist or philosopher of which we have an excess. This combined with a write of scheme ratio of two years worked to one year paid off, with the year being set at average yearly costs rather than those actually incurred by the individual, would provide massive incentive to train up in those areas of demand and maximise any return on investment. The problem is the potential bureaucracy involved in judging future demand.
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Sapient,
It is a bit misleading to say we have an excess of sociologists and philosophers. People training as engineers will often (usually?) end up working as engineers. On the other hand, people with Arts degrees end up working in a wide range of fields which might not appear to have anything to do with what was studied at university. The thing is, many people with Arts degrees are not employed because of what specific subject they studied, but for the skills they developed while studying for their degree.
Rather than seeing differing subsidies for different courses, I would rather see quotas on the numbers of students. If we need 100 lawyers, train 100, not 200.
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Won’t work samiuela – one cannot prevent people going overseas only reduce their motivation to do so. We may need say 200 doctors to be trained – yet under present policy we know half will be gone soon after graduating. So do we train 400 as we expect to lose 200? Or do we train 300 and make an effort to retain more than half once they graduate – say 2/3? This by writing off the debt of those who stay – this afforded by increasing the fees. The 200 who stay pay back nothing, only the 100 who go overseas for higher pay pay back the debt and interest.
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Samiuela,
As someone with an arts degree, though admittedly in the most scientific of the arts. I can say that the perception that someone can do an undergraduate sociology degree and gain useful skills they would not have otherwise gained is of little truth. Though I’m sure katie would argue otherwise.
I have taken my studies everywhere in the arts save linguistics and everywhere the classes are packed full of dips*its with no ability to think for themselves, no skill worth applying, and nothing improved through study other than the rate at which their liver degenerates. It is very rare that one finds an arts student whom knows something, even about their topic of study, that they don’t have to know for exams and near impossible to find one able to use any degree of critical analysis or original thought. We are producing far too many. Psychology BA’s included.
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Lets Get back to the socialist re-construction of providing free education to the worthy in lieu bonded contractual work after graduation.
Believe it or not in the seventies NZ had free education and students got a megre living alowance known as the bursary.
The NAT/ACT’s want us all to conveniently forget that part of NZ history and they certainly don’t want proud socialist baby boomers corrupting the youth with such ideas.
Check out the Workers Party NZ site about what is going on at Victoria University and how this couple have been victimised for speaking their minds.
I would like the Greens to openly condemn the Victoria University.!!!
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Yeah, socialism.
“Socialism means the abolition of private property, profit, and voluntary exchange. It means the organization of the production and distribution of goods and services—that is, of the fruits of human invention, innovation, thought, risk, talent, and labor—by political planners who allegedly know both what people need and how to satisfy that need. It means the expropriation and allotment of wealth according to those planners’ sense of value. Socialism may be understood by any child. It is taking other people’s stuff. It is also the rash and ignorant slaughter of the goose that lays the golden eggs.”
http://www.devilskitchen.me.uk/
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Sapient,
The problems you raise (about the quality of students) is not really a funding issue. If the students you observe really are “dips*its with no ability to think for themselves”, then they should not be passing their courses.
One of the problems with students having to pay for a significant portion of their courses is that there is pressure and incentive for university staff not to fail students because failed students don’t bring any more revenue if they stop studying.
I think a better solution for this problem is to be ruthless about failing students who don’t reach required standards. This will clear out the “dips*its” you refer to within a year (although personally I suspect you might be exaggerating a bit about the standard of students).
If students don’t pass all their courses, they should not be able to continue at university. I do think there should be some second chances for students who fail because of reasons beyond their control (illness and so on); these students should be able to repeat the course, or given appropriate extensions to hand in work. However, I don’t think students should be passed until they have demonstrated that they have met the required standards, irrespective of things such as illness.
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Samiuela,
Re: Illness. Extensions are generally granted in extreme circumstances, though more often than not the extensions are massive and for trivial things. One thing that frustrates me is when you have had your assignments done weeks before they are due and no-one else has bothered and so they all just demand of the teacher extensions and sometimes over half the class get them, sometimes the date for the entire class is extended. With relation to exams, there are the aegrotat or impaired performance applications which take account of exam non-attendance and exam impairment.
I would suggest that regardless of how much the student pays as a result of subsidisation the preasure on the lecturers remains the same as the money received by the university is exactly the same on a per student basis. Part of the problem lies in that university is so cheap for the students and the student allowence only makes this worse as many students go to university just because they dont know what they want to do and just muck around until they decide while they waste tax-payer money. They treat uni as a gap year in and of itself, almost all going through with a “C’s get degrees attitude”. They see uni as a right; changing the funding will change the motivation which will change the distribution of students and discourage those whom just intend to use it as a social form of the dole.
A C is all that is needed to pass your course. Even in the last year of undergrad you have to be retarded not to get a C, in fact many departments actually set the marks relative to the distribution.
To be kicked out presently they need to fail more than half of their papers in a year. I know only one person whom has managed to do that. Oddly, he was German. I think the marking needs to be harder. Problem is that the universities are focusing more on numbers than quality and the degrees are as if toilet paper.
I always flat with at least one foreigner, a couple have been nordic. Both were shocked at how kindergarten-like undergraduate study is here.
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Sapient,
Going to university in New Zealand is not cheap, irrespective of the fact that the government pays the majority of the course costs. A full time undergraduate science student will pay about $5000 per year in tuition fees. If a student gets a student allowance, they should be able to cover their living costs. If not, its either a matter of working enough hours to pay rent, food etc, or taking out a loan.
Neglecting living costs (which everyone has, irrespective of whether they study or not), $5000 per year is not a trivial amount of money to save or borrow. For most full time workers (even university graduates), this sort of money is very hard to save. Those who consider it cheap come from a privileged background.
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Samiuela,
You may not call it cheap by I most certainly do and by no means do I come from a privledged background. If the degree is worth doing then the increased potential for income generation or job satisfaction easily pays for that which has been worked up. Most students I speak to acknowledge that it is insanely cheap.
I paid well more than that for my undergrad each year (and will be paying much more for my post-grad study) and from half-way through my education I have been on the student loan as I could not receive the allowance if I wanted to and had to stop working due to medical reasons.
Under the mechanisms I proposed that would not really have to be paid back at all if the person were to work in NZ, but even were they to it is still easily done if people restrain their spending, especially if they actually dedicated themselves to their degree and thus found employment even slightly above the minimum wage.
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As I said earlier I prefer higher fees – we need to source higher funding of universities, rather than diminish their standards if we are to develop productivity.
But with the tertiary debt being written off over 10 years if the person is employed by the public service – which means the fees debt is not paid back. The country needs to maintain the integrity of its public service delivery – health, education, science etc.
The full cost of the increased fees AND interest would only fall on those working offshore.
Those working in New Zealand would have the higher fee debt to pay back -but it would still be interest free.
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There are over 1 million New Zealanders living overseas, as at the last election, and a vast majority of those were graduates who left NZ at the beginning of the Student Loan Scheme – the biggest problem that the Student Loan Act has created is not about how high fees have climbed (which is a big problem), but how we’re going to fill all the positions in our workforce when all the baby boomers retire, as we have a huge gap in the 22-36 age-group, across all sectors, due to kiwis leaving the country in droves & not coming back.
OE has always been a feature of Kiwi ‘growing up’, but the demographic skew that we now experience is compounded by the diaspora caused by student loans. There is now over $10 billion in unpaid Student Loan debt, which is climbing every year, as most of it reflects debts that have been stagnant since 1995 or so. Fiddling with the interest rate accrual and so on has hardly made a dent in the payback ratio, as the target demographic aren’t earning highly enough to manage debt repayment quickly.
Graduates who have stayed in NZ during that decade have to grit their teeth as former classmates quote salaries unimaginable in the NZ economy, and laugh at them for staying here with difficult job prospects and low salaries over the last decade, not to mention the most unaffordable housing in the developed world (possibly second to the USA, but I’m not sure how their housing costs stack up to graduate income levels).
The current trend by Universities to slash staffing in some Faculties has lead to inequities of cost-benefit for both undergradate courses, and those who have stayed here to do post-graduate study or research. Our ability to attract world-class professors and researchers is about to take a hit due to the underinvestment in proposal.
Is there anyone left to doubt that bricks-and-mortar Universities are on their last legs, as the attraction of internet-based learning becomes self-evident to those who are about to enter the tertiary education market?
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Watt D.
Socialism; “A political and economic theory or system in which the means of production, distribution and exchange are owned by the community collectively, usually through the state” Collins Dictionary
Did the above statement mention anything about confiscation of private property?
Communism; ” The belief that private ownership should be abolished and all work and property should be shared by the community” Collins dictionary.
Two entirely different concepts, one voluntary one compulsory. I do wish that you get your basic definitions right!!!!
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Kiaora David Clendon,
The Greens have some awesome ideas!
Cheers!
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Its a very good thing mentioned in this post.All those deserving students who are not able to afford the expensive fees of high ranked colleges will get a chance to persue their further studies in reputed universities.
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