Student Loan Scheme (Repayment Bonus) Amendment Bill

The repayment of student loans is one of those dark, looming clouds that our whanau faces when we look to the future.

Three of our children are living a life influenced by the reality of a student loan debt yet to be repaid.

If we are to believe the analysis of the New Zealand Union of Students’ Associations, average student debt is now $28,838.

So for the Flavell family that equates to a burden of $86, 514.

Except for just one of my children, after seven years of tertiary education, their loan has already topped over $60,000 so obviously we don’t fit the average profile.

And if that’s not bad enough, the data would tell us it’s a burden that’s on an upward roll.

Average student debt has risen by 54% since 2004 and is now a staggering 147 percent higher than in 1998.

These are costs which could cripple the nation.

These are huge issues, issues of economic and social importance, which are critical to an investment in the leaders of tomorrow.

This Bill amends the Student Loan Scheme Act to create incentives for student loan borrowers to pay the loan back.

It is, in that respect, a response to the policy problem which is the high debts being incurred by our student population.

Over sixty percent of all students face high debt – a threshold which has remained relatively constant since 2004.

What do we mean by high debt? Well, some 26 percent of students owe more than $15,000 in debt before they even start looking in the job market.

To some of us, fifteen thousand may not sound like much.

But for these students, it’s a hell of a lot on top of food, transport, accommodation, living expenses, and general bills – all expenditure items in their own right, which have increased dramatically over the last five years.

In just one area – the price of food – we might get a glance at the impact of rising student debt. According to the Food Price Index, the price of food rose 22 percent in the five years from March 2004 to March 2009.

And no-one in this House would deny that the price of petrol – a massive jump of 39 percent in that same time period – has taken its toll.

So, with all due respect, this Bill is a very small drop in the bucket when one looks at the big picture.

And we really must look at the big picture.

For the average student there will be very little capacity to make additional repayments and thus receive any kind of bonus under this scheme.

The crucial piece of information missing from this Bill as it stands is what it would take for the average student to make additional loan repayments.

What are the real costs of income tax, GST, mandatory student loan repayments; credit card debt, Kiwisaver, rent, increased food and petrol costs and any savings being made for first home purchase or planning for children?

For the average student there will be very little capacity to make additional repayments and thus receive any kind of bonus under this scheme.

Mr Speaker, I want to make a point about the relationship of student loan repayment to any other additional loan repayments.

The issue of student debt cannot be seen as one only of student loan repayments. The average debt of students has now forced the student population to look elsewhere for borrowings. And so we see large increases in other loans, including loans from parents and personal bank loans.

The proportion of students with bank overdrafts has risen 19% in the last five years, and a 32 percent increase in the amount owed on credit cards.

When we consider this sort of information, it is as if you can feel your pockets emptying.

So I come back to whether this Bill is the answer.

Mr Speaker, the trouble with the bonus scheme concept is that it only targets income earners of graduates who are earning at a sufficient level.

The Union of Student Associations, in fact, suggests it really only benefits those who are already in quite a well off position – the privileged few who will now get a ten percent discount for an early payback.

We in the Maori Party are interested in the pay forward – what is the investment we are making in the leaders of tomorrow? How will we ensure that those who are already facing disproportionately high levels of student debt – Maori, Pasifika, women – are also able to benefit?

If we take a look at just one part of the picture, that is Maori who studied for level one to three certificates – we get a sense of the scope of this problem.

Nearly 70 percent of M
ori who studied for a level 1-3 certificate without completing, and over 50 percent of M
ori studying at diploma and bachelors levels without completing, had made no progress in repayment five years later.

A big factor in the lack of this repayment is low income, especially, having income around the student loan repayment threshold. The average incomes for Maori who studied for level one to three certificates are just above the repayment threshold.

The inequalities are entrenched, with the average income for Maori with level one to three certificates being notably lower than for non-Maori with the same level of qualification.

Mr Speaker, these are complex issues, issues which require a far more comprehensive and sophisticated response than simply a ten percent bonus on repayments can achieve.
While the scheme is a good idea, it is a bare minimum and will certainly not be effective in addressing the real underlying barriers to participation in tertiary education.

And we are certainly interested in the recommendation from Te Mana Akonga – the National M
ori Student Body, which provides representation for all M
ori Student Roopk at Whare W
nanga nationwide.

Te Mana Akonga have recommended that the preferred option is barrier-free education.

By this they mean, that universal student allowances would be set at a living level; a fee abatement scheme would be in place; and every effort would be made to make it easier to invest in education.

And I would just draw the attention of the House to a very useful piece of research from Raymond Torres, published in November 2008 which concludes that social development is a powerful generator of productivity that leads to economic growth.

If we are thinking to a future it will be education and health that lead us out of economic recession, and it is in this respect that we must take up the opportunities to help address the harsh repayment obligations already confronting most loan borrowers.

With such tough economic times, we have to agree with Sophia Blair from the New Zealand Union of Students Associations that, and I quote,

“helping to address the massive amount of student debt held in our communities is a key way the Government could choose to support families through this recession”.

We will support this Bill at its first reading – because even a little drop in the ocean is a help – but we are also putting on the record our view, that we must start thinking creatively and proactively, about how we address the drivers of debt once and for all.