David Seymour wants interest-free student loans scrapped - a 'cynical bribe' policy

ACT leader David Seymour says National and Labour have got it wrong supporting interest-free student loans.
MARION VAN DIJK/FAIRFAX NZ

ACT leader David Seymour says National and Labour have got it wrong supporting interest-free student loans.

ACT's David Seymour supports scrapping interest-free student loans and has labelled National a "party of expediency" for failing to do so. 

The Government has written off $6 billion in interest on student loans in the last decade but a new report says the policy is a poor use of money and should be scrapped.

Seymour says it's clear the policy is a "cynical bribe" and while National agreed with him in 2005, they've since changed their tune and in 2008 Prime Minister John Key said it was "too hard politically to scrap the policy".

Labour Party education spokesman Chris Hipkins says scrapping interest-free student loans would "reinforce inequity''.
SIMON EDWARDS/FAIRFAX NZ

Labour Party education spokesman Chris Hipkins says scrapping interest-free student loans would "reinforce inequity''.

"Now Stephen (sic) Joyce is flat-out defending the scheme, showing National has come full-circle from a party of principle to a party of expediency," he said.

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ACT has a confidence and supply agreement with National but has a free vote on other issues.

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More than $1.5 billion has been lent by the government to students in the last year alone and $602m was immediately written off, said Eric Crampton, head researcher at the New Zealand Initiative.

Ultimately it's a subsidy for "upper and middle class households who can afford to pay their own way," he said.

"While no New Zealand data exists on student loan uptake by students from richer and poorer backgrounds, what data exists on enrolment in tertiary education suggests New Zealand is well within international norms," Crampton said.

Tertiary Education Minister Steven Joyce says the number of students completing degrees has increased under the ...
DAVID UNWIN / FAIRFAX NZ.

Tertiary Education Minister Steven Joyce says the number of students completing degrees has increased under the interest-free student loan scheme.

The only thing the zero interest policy does is shorten the repayment period and Crampton argues that for many it only cuts about one year off their repayment, which isn't a lot for the sake of $6b.

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"A student leaving university with $16,000 in student loans would take about an extra year to pay off their student debt if interest rates were 7 per cent rather than zero percent."

But both National and Labour are agreed - the right wing think-tank has got it wrong and neither party has any intention of getting rid of the scheme.

Crampton says politically the policy is a win and no party at the mercy of voters would want to get rid of it but in terms of increasing the number of students with degrees and the number of poorer students attending - it's failed on both counts.

IT'S ABOUT TRADE-OFFS

However,Tertiary Education Minister Steven Joyce disputes that and says official figures show 20,800 students completed bachelor degrees in 2008 and since 2012 the number of students has been in excess of 25,000.

He says the issue is about trade-offs and the government has it about right.

"There's those on the left that want to give students more stuff and those on the right who want them to pay more for stuff. Our view is that the settings are about right and have broad public support.

"There's a significant subsidy of tertiary students in New Zealand and it reflects about 80 per cent of tertiary costs, which is quite high given there's a lot of private benefit from it, but there's a broad public consensus that government should make a contribution," he said.

There's a number of students who go to university for longer than others and not everybody is fully employed once they complete a degree, which makes it even more difficult to pay back, Joyce said.

"If you stay in New Zealand you'll pay off a loan in about six years and people would be concerned if it extended too much into their post-study life."

'A NARROW VIEW'

Labour's education spokesman Chris Hipkins takes that a step further and says taking away interest-free student loans "reinforces inequity".

"It would make inequity worse because those on the lowest incomes would be penalised the most. It's an incredibly regressive system."

Hipkins said the think tank was taking a "narrow view of the value of tertiary education".

"This is exactly the type of ideological right wing clap-trap i've come to expect from the successor to the business roundtable."

"They assume it's all personal benefit, they don't look at the fact we put significant taxpayer subsidies into higher education...because it is not a purely personal benefit, the whole of the country benefits," he said.

A better way to spend the interest being written off would be redirecting it towards programmes in high schools, to remove barriers to tertiary education and target assistance to those less able to afford it, Crampton said.

SPEND MORE AT HIGH SCHOOL

That support extends to Labour's recent announcement to put more money into career advisors in secondary schools, he said.

That policy is backed by evidence and would "ultimately lead to students borrowing less money unnecessarily," Hipkins said.

But that's about trade-offs and he says scrapping interest-free student loans to put more money into career advisors isn't the answer.

Seymour says the loan scheme does nothing to assist students struggling to "move up from poorly-performing secondary schools".

"The question for millenials is what sort of policy will our generation support...Do you want to pay for your own education once, or pay for others' bad decisions for the rest of your tax paying career?"

 - Stuff

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