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July 26, 2005

Labour's Student Loan Policy

Politics in NZ (General)

Labour has announced it will scrap all interest payment on student loans. This will be popular in some areas, but I suggets people look very carefully about the motivations it now gives people:

1) You will be insane if as a student you do not take out a student loan. 100% of students will take loans out.

2) You will also be insane if you do not borrow the maximum amount. Even to stick it in the bank. Students are not stupid and like interest free money.

3) Likewise one would be insane to ever make a voluntary repayment. Given a choice of repaying a student loan or paying off a mortgage or even sticking money in a bank, there will be zero incentive to make voluntary repayments.

So what will be the overall effect of the policy? Total student debt is going to explode. It will be easier for some individual students, but overall student debt will have no limits on haw fast it will grow.

This is a prime example of something which looks attractive, but in fact is extremely bad public policy.

Posted by David P. Farrar at July 26, 2005 01:38 PM | TrackBack
Comments

Desperation plus!!!!! Why didn't they offer to pay students to take the money as well?

Posted by: Adolf Fiinkensein at July 26, 2005 01:48 PM

I recently had to look at student loans and IMO it's already stupid if you don't take the max loan you can get. Keep earning money, but put it in a savings account instead of paying for your studies.

Posted by: Berend de Boer at July 26, 2005 01:48 PM

no room for tax cuts?

Posted by: Marquis at July 26, 2005 01:53 PM

Bugger bugger bugger.This may well be bad public policy,but try telling the students that.This one issue may well now cost National the next election.sob.

Posted by: mara at July 26, 2005 01:58 PM

heh, heh...that's a winner...eh..

might do that phd i've been putting off till now...:)

phil(whoar.co.nz)

Posted by: phil u at July 26, 2005 01:59 PM

This is utterly nuts. What's to stop you enrolling in the most expensive course you can find and not showing up to a single class? "Good citizenship"?

Labour's welfare policy: Print more money for poor people.

Posted by: Justin at July 26, 2005 01:59 PM

I have a mate who is an stock and options broker/analyst. I could make 20% a year with this free money. Fantastic.

Posted by: Gooner at July 26, 2005 02:05 PM

I wonder if it also applies to people who are on the dole? "Need money? Become a 'student' now!"

Posted by: Jim at July 26, 2005 02:06 PM

No room for Tax cuts?....Why wasn't this in the budget?....is there a BNZ fiasco just around the corner?

I'll enroll in a course, max out the student loan then use that as a deposit on some rental properties and recysle it as fast as possible never paying back the initial principle.

Oh and watch the big gotcha...you have to stay in New Zealand....so we can't prevent a cricket tour but we can curtail our citizens going offshore to work!!!

Posted by: whaleoil at July 26, 2005 02:07 PM

Judging by the shrieks of delight in my office as everyone logs on to the calculator on Labour's site, Helen has just won the election. The folk round here, even the many who were not planning to vote Labour, are saying they most definitely will.

Unless Don's tax cuts massively outbid the average $40 a week this is meaning to most of the staff here. Except it will have to be $40 a week for everyone, Don, not just those with student loans.

Posted by: arthur at July 26, 2005 02:08 PM

Another reason to boot Labour out really.

How pissed off would you be right now sitting in NZ having slaved your guts out for the last 10 years to pay off your loan (and about the loan amount again in interest) only to have the Govt now say they will write off all interest.

Big kick to ones guts.

Posted by: Cathy at July 26, 2005 02:11 PM

Other than degree (not the university kind...) is there any difference between this and National's tax rebate system? Both result in allowing access to money at lower than market rates - surely both should therefore encourage needless borrowing?

IMO even if Labour do have a chance to enact this policy, there's still one compelling reason to pay your loan off if you can - you can guarantee it won't last forever! Might as well make the most of the free interest period while it lasts...

Posted by: DC at July 26, 2005 02:12 PM

Yes this is obvious vote-grabbing.
Yes it is stupid when you think about it.
and Yes students are going to love it.

Hell, I am a student and part of me wants to vote Labour because of this single policy! (Don't worry that part is being surgically removed later today)

Smart move from labour - they have just ensured that they will win the student vote. However, I think they will lose a lot of votes from working people who will think "So where is my tax cut going?"

Posted by: Blu at July 26, 2005 02:12 PM

This is just a dream for rich parents. Stick whatever money you were going to use to pay your kids fees in the bank, then use the accumulating interest to meet the minimum payments of the loan once they start working. Your child's university education basically costs you the time value of money.

Middle class welfare, nothing quite like it.

Posted by: Gordon King at July 26, 2005 02:16 PM

You miss the main event, Blu. It's not just the student vote they catch, it's everyone in the workforce under the age of 32 or so. You should here the whoops of joy going up all round my very big office.

Election winner. A huge bribe with my bloody money. Again.

Posted by: arthur at July 26, 2005 02:18 PM

Despite being a student, I think this is the most absurd policy I have heard recently. Sure I'd like to pay less on my student loan, but why should all the other overtaxed NZers subsidise me? This is tax and spend socialism at its worst.

Conceededly, this policy could make students vote Labour, but I think students are becoming more intellegent and politically astute than to just vote for the party which will give them the most short-term electoral-candy.
I expect Kiwis will see this as the desperate bribe it is. No rooom for tax cuts my arse...

Posted by: Michael at July 26, 2005 02:22 PM

They must have been worried about losing the student vote so they are going to buy their way back if possible. You can just see how this is going to be rorted if the Labour Government does not impose some restrictions and it is those restrictions that will make the policy difficult to understand. Of course this would be unfair to tax payers and yet again the Labour Party favours the people who are plundering the Treasury over those who are financing it.

Posted by: tim barclay at July 26, 2005 02:25 PM

This is a huge policy - a bribe along the same lines as Peters' offering to raise the pension - and it will work even better to attract votes.

This generation has a debt tolerance that is alien to any other - many Grandparents are appalled at the 30,000 loans (not a large figure as far as loans go) their young'uns have, this will attract concern votes from them, self-interest votes from students and loan-bearers: it is gold vote-grabbing and probably as ill-concieved and ruinously expensive as Muldoon's Super promise.

Posted by: Simon Pound at July 26, 2005 02:25 PM

Stuff's headline is reducing student debt ... Probably one of the more misleading headlines of the campaign! It would appear we have the reason the budget was so miserley - Santa Claus has come to town ... just before the election!

Posted by: GPT at July 26, 2005 02:27 PM

And another thing - it’ll certainly sort out that embarrassing big surplus problem, as with another couple of these policies NZ will never, ever, have a surplus again!

Posted by: Simon Pound at July 26, 2005 02:29 PM

It's a great policy. Another step towards unwinding user-pays tertiary education.

Those of you saying it'll cause a blow-out in borrowing - we've already had that, as a consequence of our 2000 changes to the scheme which made loans interest free while studying.

Indeed because allowance eligibility is also going to go up, the total amount that students can borrow will decline. Even if they all borrowed to the max they are entitled to, that'll be less than today (unless the number of students explodes).

Importantly, it also fits into the rest of the framework. It saves me the deposit on a house, and now instead of making extra repayments I'll be able to put the money into KiwiSaver (eventually), and actually have a prospect of realising the great home-owning dream.

It's good stuff, and it's bloody popular. Unbeatable combination.

Posted by: Jordan at July 26, 2005 02:31 PM

anyone carrying a student debt, such as myself, would be a fool to vote blue now.

that damn thing blossomed 30% over the past few years.

who cares what the future students do, me and everyone like me will vote labour to make the same $16k saving on interest...

Posted by: che tibby at July 26, 2005 02:32 PM

Arthur:

You are right - I did not think of people no longer studying. However that people without a student loan (and lets face it - if Labour gets back in, this is going to be 0% of the population), or people with small ones, are going to hate this policy.

People without student loans will be punished for not studying by paying for those of us that did. Not cool

Posted by: Blu at July 26, 2005 02:32 PM

My understanding is that students want greater allowances to cover essentials to stop them getting into mountains of debt in the first place.

Posted by: Luke Byers at July 26, 2005 02:33 PM

So Labour's policy removing interest is a bribe, but National's tax rebate policy isn't?

It stinks of hypocrisy in here.

Posted by: weizguy at July 26, 2005 02:41 PM

Phil, there's about as much chance of you getting into a PhD program as there is of me voting Labour. cor. whoar.

Posted by: Justin at July 26, 2005 02:43 PM

The difference between a tax cut and a bribe is obvious. One is giving taxpayers their money back, allowing them to do whatever they like with it. The other is pretending that the benevolent governtment is being kind to them by spending some of "its" money on them as Helen sees fit.

Posted by: Michael at July 26, 2005 03:46 PM

It addresses the flight of recent graduates overseas and the problem of compound interest making large loans much more difficult to pay off, especially for those with lower incomes.

If tax cuts should stimulate the economy through the extra disposable money people have, surely this will have similar consequences due to the extra money people don't have to pay off their loans, not to mention the increased number of skilled workers staying in NZ?

Posted by: Lindsay at July 26, 2005 03:49 PM

People, It is for those grads that stay in NZ. If you leave NZ there will be interest. It is a two pronged policy, keep quality grads in NZ and reduce debt - simple.
If grads are staying in NZ rather than heading overseas they will be paying tax into the NZ system - therefore contributing to the cost of this policy. I'm sure many parents and grandparents are not going to mind offering their taxes for a policy like this.

Posted by: JW at July 26, 2005 03:53 PM

Both National and Labour policies do nothing to address rising student debt. All the policies do is create conditions of a false economy for students to increase their debt. The only fair policy which reduces debt is the Universal Student Allowance. It is really disappointing that both parties have totally missed the ball on this and I predict a big blowout in student debt over the years to come.

Posted by: Toa Greening at July 26, 2005 03:59 PM

National need to produce a fancy calculator like the labour one which includes the tax rebate for the loan plus the proposed tax cut - the difference between the two options may be minor in most cases but will put more money back in everyones pockets.

Posted by: cap at July 26, 2005 04:01 PM

There ain't no suck thing as a free lunch.While idiots will vote Labour to get this bribe they will be screaming in a few years when their taxes are through the roof to pay for the mess.Good job! I hope this country goes to hell...it deserves to.

Posted by: James at July 26, 2005 04:01 PM

Hey! Looks like Labour just got my vote back!

Posted by: Dim at July 26, 2005 04:03 PM


Hahhahhah what a winner this is

Comments from Dpf, “You will also be insane if you do not borrow the maximum amount. Even to stick it in the bank”

And Whaleoil “ I'll enroll in a course, max out the student loan then use that as a deposit on some rental properties and recycle [sic] it as fast as possible never paying back the initial principle.”

Comments like this illustrate the how out of touch you two are. I’m sorry David, I know the crappy student loan scam your government introduced allowed students to borrow like there was no tomorrow and they didn’t have to prove it went on fees but the rules have since been tightened. You CANNOT now get any money from the loan scheme unless you provide invoices and receipts and the fess are normally paid directly to the tertiary provider. Living cost are dolled out on a weekly basis as well.
So much for reason 2 aye.

Posted by: Pete at July 26, 2005 04:04 PM

Wonderful - now that the taxpayer is going to subsidise my debt servicing, could Helen Claws please do the same for the mortgage in my non-gratuate childless partner's name?

Posted by: Craig Ranapia at July 26, 2005 04:06 PM

We are perhaps missing the point - it will certainly guarantee that graduates remain in the country - that is its intention (and one that certainly beats anything the Nats currently have to offer).

As for the free-for-all that must inevitably result - dare I say Labour would iron out indiscriminant borrowing before implementing the policy? Is that even possible?

Who cares, I think my vote has just been bought - this maybe the first election seeing me vote red too!

Posted by: sam at July 26, 2005 04:09 PM

justin said.."..Phil, there's about as much chance of you getting into a PhD program as there is of me voting Labour. cor. whoar..."..

um..a masters(hons) should crack that door open..eh?..cor!..whoar!..

(mmmm..i could do a doctorate on the new media...that could be interesting..and relevant..)
oh..the possibilities..)

whaddayareckon...has labour just won the election..?

what a master-stroke..the nats left floundering..

tax cut..?..schmax cut..

(they'll be burning the midnight oil at nat hq tonight ..eh..?)

phil(whoar.co.nz)

Posted by: phil u at July 26, 2005 04:12 PM

Labour: We decide.

Posted by: James Bond at July 26, 2005 04:16 PM

Probably in Sociology.......

Posted by: Simon Pound at July 26, 2005 04:18 PM

Fuck Labour, this is the most unscupulous policy they've ever dreamed up. They JUST DONT CARE any more!

This was Labours Nuclear Option. It doesnt matter what National says now, because LABOUR IS BRINGING BACK FREE UNIVERSITY EDUCATION!!

What about all those lefties that were saying that people voting with their wallets was a bad thing? That tax cuts were simply a vote buying exercise, and that it was a cynical policy by National. What do we hear from them now?

"anyone carrying a student debt, such as myself, would be a fool to vote blue now." Like you ever fucking would, chet.

Jordan has said that student debt has blown out over the last few years, but he seems to think that this means it cant blow out further! Oh wait, my bad, "(unless the number of students explodes)." Yeah, thats not very fucking likely is it?

I worked my way through uni, i didnt get a student loan because I didnt want to be encumbered with it for the next fifteen years. I had the idea that hard work would pay off. More fool me it appears, because now I have to pay for someone other fuckers education and his fucking interest payments too!

If Labour wins the next election, it will be on the back of this short-sighted policy, and we will have to wait three-years to fix an additional three-years of fiscal buggery.

I fucking love this line, "keep quality grads in NZ and reduce debt"- what-the-fuck-ever! Top quality grads will still leave because NZ is boring and pays shit. Debt will fucking explode, it wont be paid back because there is no penalty for not doing so.

Its all about incentives, what incentive is there to NOT take out a loan? There should be atleast one! What is the incentive to NOT enter a bullshit course, so that you can say that you are educated but ultimately still know fuck all? Well there is one less.

Mark my words. We will see a huge increase in the number of students, the number of courses, the level of debt and a sharp decrease in the level of payments and no fucking change whatsoever to the flight of top quality graduates.

Posted by: Kimble at July 26, 2005 04:20 PM

BTW, I ran my student loan through the calculator on the Labour website.

Apparently, my loan will be paid off four months faster with a total saving of just over $2,280. Of course, that's assuming 1) my partner doesn't get that job in Australia, 2) inflation stays at 2.8%, and 3)the total loan interest remains at 7%.

Whee! Thank you Santy Claws! And to anyone who votes for this: Suckers! Or am I the sucker for actually busting my hump to minimise my borrowing and maximise my repayments?

The funny thing is that I don't actually believe working families should be soaked to make my life more comfortable. Funny that...

Posted by: Craig Ranapia at July 26, 2005 04:22 PM

Phil, must be a fairly recent Masters (hons) you've got there. In the old days, they put a lot of weight on punctuation, grammar, spelling and clarity of thought and expression ... not to mention logic. But why submit your thesis in academic writing when you can submit it as a finger painting, eh? eh? whoar!

Posted by: Justin at July 26, 2005 04:23 PM

It is pretty easy maths - if you earn 50k and National drop the 3% off the 30% rate and 2% off the 20% rate bottom tax brackets with their tax rebate on student interest then with a 20k loan (larger than average) students would be $1560 better off. Compare this to the $1400 labour is offering to write off. The difference is that I [having paid off my loan] would also get a slice of the pie.

Posted by: cap at July 26, 2005 04:24 PM

Simon (Pound),

it will really only affect the cash surplus - according to Labour this is only going to rise in cost to $300 million p.a.

Not much of a dent in the surplus at all.

Though simple mathematics suggests that, given they expect it to cost $100 million in the next year that they're anticipating "student debt" to reach more than $20 billion...

Posted by: Graeme Edgeler at July 26, 2005 04:28 PM

It is pretty easy maths - if you earn 50k and National drop the 3% off the 30% rate and 2% off the 20% rate bottom tax brackets with their tax rebate on student interest then with a 20k loan (larger than average) students would be $1560 better off. Compare this to the $1400 labour is offering to write off. The difference is that others [maybe people like me having paid off my loan] would also get a slice of the pie.

Posted by: cjp at July 26, 2005 04:29 PM

The Labour tertiary announcement was greeted by spontaneous applause in two different workplaces I know of. Both organisations are staffed by recent graduates and the parents of those about to go onto tertiary education. At one office, the staff I talked to were completley aware that this was a pure vote-grabbing exercise, yet still loved it - some even saying that this was enough to swing their vote. If this reaction was in anyway indicative of the general populace, then this could really gain some traction.

Posted by: sheriff at July 26, 2005 04:29 PM

Here is exactly **why** this policy does not induce reckless, speculatory borrowing:

Assuming you don't get a student allowance (which more people will get with Labour), you can borrow $150 per week for mliving costs plus $1,000 (I think) for course costs. That money can go into your pocket and you could, technically, invest it. But in order to get that money you also **must** borrow the money for fees - about $4,000 at University of Auckland for example - and you **cannot** put that money in your pocket. It has to go to the institution.

So in order to obtain about $7,000 investable dollars, you would have to incur about $11,000 in debt. Assuming average annual after tax returns of 5% (pretty reasonable assumption), it would take between 9 and 10 years for you to reach $11,000. And you'd be taking all the risks of an economic downturn, a policy reversal, etc.

If you do get a student allowance, you can;t borrow as much - the incentives remain as I've given them here.

Speculative borrowing is not worth the risk. Therefore no debt explosion. And I'm convicned that Labour's additional bling for student budgeting services will make this point all over the country come April.

Posted by: Sally at July 26, 2005 04:34 PM

Sheriff:

I don't think the applause will be quite so loud when people realise the $300 million a year will actually have to come from SOMEWHERE, and that the assumptions involved (just look at the calculator on Labour's own website) are as dodgy as such assumptions always are. I wouldn't bet the farm on my income increasing at least 3% a year, every year, for the rest of my working life.

I think the media and the Opposition are going to have to keep asking some very hard questions. Because once you get behind the talking points, this policy looks more and more like Enron accounting calculated with fool's gold.

Posted by: Craig Ranapia at July 26, 2005 04:46 PM

Furthermore, if you are working now and earn anything over $26,000 (assuming very modest 3% salary growth) then you'll have paid back the $11,000 I mentioned above before 10 years are up - so you'll have repaid the loan before you make **any** money off your speculation, and will have taken on all sorts of risks in the meantime.

If you engage in the speculative borrowing I mentioned above in your first year of a three year course, and then got a job paying anything over $31,000 annually (current average graduate starting salaries are $38,000), then you will also have paid off the loan before making any money off it.

Either way the sepculative borrowing argument just doesn't stack up. Sorry right-wingers, your reposte is a dud.

Posted by: Sally at July 26, 2005 04:48 PM

simon said..'..Probably in Sociology......."

no dear heart..i'll leave that to you..or perhaps i could suggest a writing course for you....?..your local polytech may be able to help you out there..

you do recognise/realise that you need some urgent work in that area..eh..?...:)


justin said.."In the old days, they put a lot of weight on punctuation, grammar, spelling..'

a tad anal are we dear heart...i'll bet you like making lists..are you a virgo by any chance..?..they tend to be keen on that sort of thing....:)

phil(whoar.co.nz)

Posted by: phil u at July 26, 2005 04:51 PM

Cool! Day 2 of the campaign & already we're into a bidding war. Bring on interest rate relief for home owners!!

(Please?)

Posted by: llew at July 26, 2005 04:51 PM

Middle new zealand will be paying forever for labour's desperate election bribe. While they are likely to pick up a student vote, middle NZ will turn away as this blatent attempt to buy votes from the same party that has been screaming "not enough money for tax cuts."

stupid evil socialist government.

Posted by: Peter McK at July 26, 2005 04:52 PM

This policy will not stop as many graduates going overseas as everyone thinks it will. It will stop some going that is for sure, but it will not stop the ones going because for a lot of us there are simply not the opportunities in New Zealand that can be had overseas.

Take doctors for example. Sure, their student loan is a big factor for a lot of them leaving, but another major problem is the fact that the population of New Zealand cannot offer the same experiences that are essential to a practising specialist.

Also, young people feel the need to find out what else is out there in the great wide world. A quick survey of my friends found that a lot of them will still leave at the end of their degrees simply because they feel the need to experience that rest of the world for a few years. Hell, most are them are not planning on ever coming back .

Posted by: Blu at July 26, 2005 04:52 PM

Craig, how are the assumptions on Labour's website ( www.labour.org.nz - hehehe ) dodgy?

Inflation really is 2,8% right now, current student loan interest really is 7% right now, and you can put in whatever figure you like for salary increases.

I guess their 2% figure is about having your salary keep up with inflation, on average. That's not at all hard to justify when you factor in general wage rises and the fact that you'll become more senior as time goes by.

Posted by: Sally at July 26, 2005 04:52 PM

Ok OK say i vote red becouse of this one issiue and despite all odds they actually get re elected, what garantee is there that this will happen ..........Sweet F A

Posted by: rayza at July 26, 2005 04:54 PM

This policy will not stop as many graduates going overseas as everyone thinks it will. It will stop some going that is for sure, but it will not stop the ones going because for a lot of us there are simply not the opportunities in New Zealand that can be had overseas.

Take doctors for example. Sure, their student loan is a big factor for a lot of them leaving, but another major problem is the fact that the population of New Zealand cannot offer the same experiences that are essential to a practising specialist.

Also, young people feel the need to find out what else is out there in the great wide world. A quick survey of my friends found that a lot of them will still leave at the end of their degrees simply because they feel the need to experience that rest of the world for a few years. Hell, most are them are not planning on ever coming back .

Posted by: Blu at July 26, 2005 04:56 PM

!

Posted by: Simon Pound at July 26, 2005 05:00 PM

Sally, it removes the disincentive to borrow. It removes the only reason everyone isnt in debt up to their eyebrows. Lets say you borrow the $11k. Lets say you take twenty years to pay it back. You will be out of pocket by exactly.....fuck all. Incentive to pay off early? None. Incentive to increase your payments? None. Incentive to NOT sit on the money for 9 to 10 years? Unless you are planning to go overseas, none.

Heres some maths for you. You get the $7000, and the $4000 for the fees, totaling $11,000. You take the $7000, put it in a low-return-low-risk asset and you get 5% pa. After ten years, you have accumulated over $11k. (Gotta love compounding!) You can then use that $11k to pay off your entire debt. It hasnt cost you a cent. has it cost anyone anything?

Muggins Taxpayer fronted the $11k to start with. Whilst the money has been in your investment he hasnt been able to use it. Assuming, an inflation rate of 2.5% the value of his money has gone down to around $8800. Also, if the 5% you are getting for your riskless investment is below a more appropriate discount rate, 7% for example, Muggins has lost around $2000.

If you were to invest in government stock, a reasonable thing to do, then in effect the government would be making up the entire $4k. In effect your education was completely free.

Posted by: Kimble at July 26, 2005 05:00 PM

This policy will not stop as many graduates going overseas as everyone thinks it will. It will stop some going that is for sure, but it will not stop the ones going because for a lot of us there are simply not the opportunities in New Zealand that can be had overseas.

Take doctors for example. Sure, their student loan is a big factor for a lot of them leaving, but another major problem is the fact that the population of New Zealand cannot offer the same experiences that are essential to a practising specialist.

Also, young people feel the need to find out what else is out there in the great wide world. A quick survey of my friends found that a lot of them will still leave at the end of their degrees simply because they feel the need to experience that rest of the world for a few years. Hell, most are them are not planning on ever coming back .

Posted by: Blu at July 26, 2005 05:00 PM

DPF - I would argue that the incentive to make voluntary repayments is still there, if not bigger. Why? once your loan balance hits $0.00 you get a 10% 'tax' cut on income over the repayment threshold, 'tax' coz although collected by IRD they are not tax, but compulsory repayments. For a lot of people, that alone will make this policy attractive :)

Removing interest on loans may also keep some in NZ and because of the above make owning a house/saving for retirement a little easier.

On the down side I totally agree tho on the borrowing remarks. Clever students have been doing this since no interest while studying started. Borrow the max, invest it in debenture stocks at 9% or so and make a little extra to give IRD once you finish studying.

Posted by: Steve at July 26, 2005 05:04 PM

Sorry about the repeated posts - stupid computer kept telling me that it couldn't post it and to try again.

Posted by: Blu at July 26, 2005 05:04 PM

Kimble

You're wrong because repayments through the tax system are **compulsory**. You simply cannot sit on the money because the IRD takes your repayment off you every week. See my second post on that. Under most scenarios, including all the reasonable ones, you actually repay the loan before enough time has passed for the compounding interest to actually make you a profit. So you make a loss, and there's nothing you can do about it due to the compulsory repayments.

Posted by: Sally at July 26, 2005 05:10 PM

The line about keeping graduates here is a crock.

Clark says "This policy is intended to encourage graduates to stay in New Zealand...We recognise that for some people student loan debt may have influenced their choices about where to live and work."

But a Ministry of Ed report from March this year says, "Less than 5 percent of all those who have ever used the scheme were recorded as overseas in 2004. About 25,400 (or 6 percent of) borrowers with a current balance were recorded as non-resident as at 30 June 2004. The corresponding figure for 2003 was 24,700 (also 6 percent). The relative stability of this figure implies there is no evidence of large numbers of New Zealanders leaving the country to avoid repaying student loan debt."

Blatant vote buying pure and simple.

Posted by: Peter Stuyvestant at July 26, 2005 05:10 PM

I think we’re over-baking this significance of this policy. Sure, we (most of us) are all (relatively) young and (relatively) educated and student loans are meaningful. But to your cow cocky from Manawatu, your machinist from Mangere, and your empty-nesters from Karori, this don’t change nothin’.

Posted by: Glenn at July 26, 2005 05:13 PM

Okay this may sound selfish, but so far no party except ACT has provided for me!

I don't have a student loan, having taken out more on my mortgage to pay it off!
I don't have a child in preschool (she is in school).

So under National I get no rebates. I dont't have a company so won't get a tax cut there.

Under Labour I get nothing but more bloody taxes!

This is just f#@*&^ grandstanding from both major parties. Shove your 'mainstream' line Don. Why should I vote for you? I'm very mainstream middle class and you don't give a shit about me.

Shove your freebies Laboour. I won't vote for you.

I've coined a phrase.

"Under ACT you're ALL better off. Whether you're a student, mum or worker".

I don't normally get this hot under the collar but handing out lollies to segments of societies is shit policy.

I thought we were all New Zealanders? Well only ACT provides for all. The other parties can buggar off.

Posted by: Gooner at July 26, 2005 05:16 PM

Sally,

are you certain you have to borrow money for the fees to get be able to borrow money for living costs/course related costs? This doesn't mesh with my understanding.

Posted by: Graeme Edgeler at July 26, 2005 05:22 PM

Well said Gooner.
But Glenn, this policy will affect your cow cockies, empty nesters, etc.
They will be paying for it all.
Me too.

Posted by: Darren at July 26, 2005 05:25 PM

Well said Gooner.
But Glenn, this policy will affect your cow cockies, empty nesters, etc.
They will be paying for it all.
Me too.

Posted by: Darren at July 26, 2005 05:27 PM

No really, phil(self-promotion.co.nz) WTF?

If your thought patterns extended past one-line, and all the way to a shift key, I might take you seriously.

The reason that regardless of your relentless whoring (whoaring?) around of your URL that you still have sweet fuck all readers is that:

Your 'wacky' decision to dispense with punctuation is only passed in irritation terms by your juvenile smiley faces.

You are a sad, grasping irrelevancy and it depresses people to happen across your desolate addition to the world's most indulgent habit.

You have nothing useful to add, ever.

There's more, but I've wasted enough time thinking about your inadequacies already.

Simon (don't care if people find me or not)



Posted by: Simon Pound at July 26, 2005 05:29 PM

So universal cutting the interest rate is a bad thing, but universal tax rebates are a good thing....

Posted by: Conor at July 26, 2005 05:48 PM

Graeme

Yes, I am sure. You **must** be enrolled in a course in order to get the other components of a student loan. And the only way to be enrolled in to pay the fees. You could pay the fees yourself rather than borrowing them, but it amounts to basically the same thing.

Posted by: Sally at July 26, 2005 05:50 PM

Sally:

Well, you've explained why I described the assumptions as "dodgy" - "right now... right now... on average... when you factor in... the fact that {which is just another assumption)..."

Well things change, the real circumstances of real people don't follow some statistical averages - I spent a lengthy period out of the workforce due to (unexpected) ill-health, and my income and career prospects are far from what they were. If my partner has another massive heart attack (spit three times, may that day never come) all our careful budgeting — including the savings - goes down the toilet in a heart beat.

As I said on Jordan Carter's blog, full credit for not burying the assumptions in microscopic print at the foot of the page. But there are going to be a lot of assertions flung from all directions over the next 7 1/2 weeks - and any intelligent voter should remember they come with assumptions attached, which should be treated with extreme scepticism.

Posted by: Craig Ranapia at July 26, 2005 05:50 PM

Duh, think about it - almost all students have loans now anyway, unless the belong to the Uncle Don priviledge club of richies

Posted by: dd at July 26, 2005 05:55 PM

Tell Helen she is 5 years too late! What is the point of getting a degree, especially in the area of science & technology (my area), when there are going to be no opportunities in the country and crapping paying jobs. Get paid more cleaning Helen Clarks fucken office.
Labour stifles entrepreneurship and tries to socially engineer everyone down to the same level of meritocracy.
Many senior scientists (namely my supervisor) are going overseas because of this.

A universal student allowance would be MUCH better... and National still have time to make it policy.

It is not over till the fat lady sings..... and that'd probably be Tariana Turia.

Posted by: Nick at July 26, 2005 05:59 PM

Don't be silly Conor. Tax cuts will only help these rich right wingers where as Labours loan policy actually will benefit people who need it

Posted by: Simon at July 26, 2005 05:59 PM

Don't be silly Conor. Tax cuts will only help these rich right wingers where as Labours loan policy actually will benefit people who need it

Posted by: Simon at July 26, 2005 06:01 PM

ooooh..simon...a bitch fight..let's go darling..(did the writing comment strike home did it..?..as it should have)..

shall we start with your pathetic emulations/impersonations of the last resident longhair on tv1...(the late lamented..)your purposeful strides towards the camera..what a wank..oh so fucken quirky..eh.?

ever had an original thought..?..we have yet to see it in any of your outings...

now lets talk about the crap excuses for interviews you do on bfm shall we..you haven't got a fucken clue really have you..you are just one of those who love the sound of their own voice..

(is that why you are attacking..i remember now..i did a piece a couple of months ago savaging your inadequacies/shortcomings in that arena..simon (don't care if people find me or not)..:)

it took you a while to get back..eh?(had to build up a head of steam did you..?)

anyway, you'll be a 'who was he ' in a couple of years..think on all of those who have gone before you..and deluded themselves they were there for the duration...:)..(<< a silly smiley just for you simon..)

re my reader numbers..started in feb..292 for that month..

thanks to celebs and their nose candy i cracked a grand a day on a couple of days last week..:)

i'm happy with progress to date..thanks for your concerns..

(and a bit anal with the capital letters there eh..?)virgo..?..maybe capricorn..?

(how was that for a bitch slap darling...when you've uncurled from your foetal position..come back for more if you like..i do have more for you..you know..)

and a solution for you here..if i annoy you..do as i do with you..stay away from my output..:)

phil(whoar.co.nz)

Posted by: phil u at July 26, 2005 06:07 PM

You seem to follow me closely, but as far as I can see that is the only indication of discernment I can find.

I invite you also to stay away from my output, as I do from your site, religiously. I only run into your pap as you try to phil(whore yourself about).

It seems one of us loves the sound of my voice, and it isn't me.

A bitch fight would imply two aging, sad and wretched queens.

Sorry Phil, I'm in none of those categories.

Posted by: Simon Pound at July 26, 2005 06:25 PM

is that it..?..shit you're no fun..

i declare a slam-dunk...game over..

phil(whoar.co.nz)

Posted by: phil u at July 26, 2005 06:32 PM

Hi David,

I have posted my reply to your post on my blog. It got too long to leave in a comment :)

Posted by: Joe Hendren at July 26, 2005 06:42 PM

Craig

Of course people's circumstances change - but if you had every possible change built in to the calculator it would take about an hour to fill in. It's only meant to be indicative - and the indications are that people like what it tells us about Labour's policy.

Posted by: Sally at July 26, 2005 06:47 PM

So the Labour lolly scramble begins.
Where is the incentive for self responsibility?(that's right socialists don't have any because they expect you to do what your told). I have a student loan and did so on the understanding I would have to pay it and the interest back. This in the real world is called an investment, not to be confused with a Labour handout. There is no way I will be voting Labour. I can hear all those students in three years time complaining already "it was great not having to pay interest, but where are the jobs?". Thats because Labour would have completely fucked the economy and there won't be any.
I'm sure the hard working tradepeople are loving this, having to pay their tax to supplement someone wanting to study useful subjects like Art History.
And what the fuck is going on with Labours example of a typical student "Ben" who has a $48K loan, earns $50K as a lawyer and is only expecting a average pay increase of 3%. How the hell did he pass law if he can't even work out that is a shit return on investment.

Posted by: aaron at July 26, 2005 06:50 PM

Well, this is easy, if Labour win I will enrol in the cheapest course I can and take out the absolute max student loan I can get, every year. I will take the entire amount and invest it. Why not, it is the logical thing to do, and we should all encourage every single NZ'er to do the same. Free money, a dream !

Posted by: Ed Snack at July 26, 2005 06:57 PM

Great idea - the Nats are screwed. The only refinement I can think of is that the student loan/allowance changes should not be made available to ACT/National supporters - they should be made to pay their full course fees up front, with no living cost component or student allowance, on the grounds that they're probably going to dodge their taxes later anyway and won't make any positive contribution to society at all once they have obtained their tertiary education qualifications.

Posted by: Michael at July 26, 2005 07:14 PM

This policy is disgusting... Why doesn’t Labour top it off and make it retrospective. They should pay all interest ever accrued on loans back to students - that would be the most equitable solution now wouldn't it? Can you imagine the problems this is going to create? What a cheap election tactic.

I finish my degree at the end of this year and I have to say that Australia is looking highly promising should Labour be re-elected. The best and brightest in this country will see the long-term effects of such bad policy on the economy and bugger off.

That said Labour has a history of not honoring their promises to students anyway, so there probably isn't much to worry about.

Posted by: Brendan Jarvis at July 26, 2005 07:18 PM

This is a tax cut to the students and the fingers to the general taxpayer. This is just round 2, when National announces its general tax cuts which will benefit everyone and not just students I predict the resentment felt by the general tax payer at Labour's selectivity will hurt Labour big time. I feel that hard working blue collar tradesman is gone from Labour and this will intensify it and that will be the swing.

Posted by: tim barclay at July 26, 2005 07:24 PM

Michael I think your confused. National and Act supporters are the only ones that make positive contributions to society. Since we pay 80% of the tax in this country I'd like to see how you and your red mates woukld get on if we all got up and fucked off to Australia. The only thing Labour supporters are good for is wasting our hard earned money on useless courses and benefits. If it wasn't for people like you the surplus wouldn't be $7B it would be closer to $20B.
Bye the way I am quite happy to take you up on your offer of the right not qualifying for 0% interest loans. You can get fucked and use mine to buy yourself a bigger cardboard box under Grafton Bridge.

Posted by: aaron at July 26, 2005 07:33 PM

This policy of Labour's to give a $300 million tax cut to students seems to rule out any attempt to match a general tax cut from National. And when National's general tax cut (which will also benefit students) is announced and students are no worse off under National except National's general tax cut is permanent instead of short term (while you are paying off a loan) will mean that National's will be more popular. I think Labour just stuffed up announcing such an expensive selective tax cut.

Posted by: tim barclay at July 26, 2005 07:51 PM

Nothing is free! Holding money costs. Just because it is an opportunity cost does not make it less real. What else could be done with the money? Could government debt be reduced? Could another life saving operation be performed? Why are these considerations less deserving?

The same people that consider a tax cut a waste of government(!!) resources, are loving this policy. But of course, they love it when the government SPENDS OTHER PEOPLES MONEY!

It is another benefit, it is a back door reduction in university fees but without the gaurantee that university will be cheaper. It is a discount for university students, who are at Uni to improve their own lives. It is just another redistribution of wealth, but who is it redistributing from? Who is paying for this? Well, every tax payer does. What does the tax payer get out of it? A marginal (and theoretical) increase in NZ productivity. What does the student get out of it? Oh, just an increased earning potential for the rest of their lives.

Is this fair? A person who never went to Uni, who isnt ever going to Uni is not only subsidising the larger part of the total cost of the education, but now is subsidising a greater portion of the small part that the student has to pay.

Posted by: Kimble at July 26, 2005 07:58 PM

Regarding your point (2) Mallard said the money had to go to the learning institution. If students can't use it themselves there wouldn't be much point trying to draw a lot.

However what I wonder is how can the government cry poor during the budget and now start throwing money around.

I expected all along Labour would hold back money to use as bribes during the election. As Hide termed it bribing us with our own money.

While this has been a king hit smart move for Labour the message that surplus cash under Labour will advantage one group and not the rest of society against tax cuts for everybody might counteract it.

Posted by: Bob Howard at July 26, 2005 08:09 PM

Hehe, I'll be able to get my traditionall Nat-voting father to vote Labour/Greens over this, if I haven't already convinced him that Brash is a war monger!! Yahh!! Bout time they got rid of this outrageous policy.

Posted by: Christiaan at July 26, 2005 08:14 PM

Most of the comments being made here by Nat party hacks seem to be of an ideological nature rather than a practical one.

Check out frogblogs latest:
http://blog.greens.org.nz/index.php/2005/07/26/a-very-good-policy/

And you might like to explain why this policy isn't the problem you suggest it is in other countries, as noted by a commentator on frogblog back in May:
http://blog.greens.org.nz/index.php/2005/05/01/yeah-were-on-to-it/#comment-293

Posted by: Christiaan at July 26, 2005 08:22 PM

Tim
you are wrong unfortunately. labour will have a number of alternative plans to trump nationals tax cuts but make sure they target more potential labour voters. good but cynical and hypocritical politics. they will try to buy the voters

Posted by: sagenz at July 26, 2005 08:27 PM

National supporters commenting on this policy announcement are pissed off, not because of the cost of the initiative but because it came from the Labour Party and not them. It reduces to National proposal to the dustheap which is the main reason for the griping. It's clear that Labour are waiting for Brash to unveil details of his tax cut plans so that they can come in behind and go one better. This is a classic "Horns of the Bull" military tactic which unfortunately the Nat's strategists didn't see coming.

Posted by: Rowan at July 26, 2005 08:31 PM

Aaron, one can only hope you piss of to Oz sooner rather than later. NZ will be better off, sadly Australia won't.

Posted by: Lloyd at July 26, 2005 08:41 PM

I'm sure most National supporters like myself worked our way through tertiary education so that we didn't accumulate a financial burden. What is the disincentive for more school leavers to amass huge debts when there is no reason to contemplate the end result. This policy isn't even tied to any form of productivity in that you don't even have to be paying tax to qualify. At least the National party followed ligitimate business guidelines by writing off interest as a taxable expense.
This policy shows why people who don't pay tax shouldn't have a say in how the government is made up as thet are too easily bribed and self interested. Whats going to happen next week? Increase in weekly payments to $1500 and a free holiday to Australia for beneficiaries?

Posted by: aaron at July 26, 2005 08:48 PM

Sally:

Well, you keep making my point don't you? I think there are people who are going to look behind the sound bites and Enron accounting, and see this policy for what it is. A sad little vote buying exercise that's being over sold and will under deliver.

Posted by: Craig Ranapia at July 26, 2005 08:49 PM

Have faith Aaron. Think of this as a tax cut for students (and stuff the general tax payer) that was dreamed up at the Labour Party strategy meeting this morning. When the general tax cuts are announced I am sure Labour will try to come up with something to out-bid them. (An aggressive adjustment to family care I am picking plus a small general adjustment, who knows). But by then their credibility will be shot. The rebate scheme and the general tax cuts are part of an overall package. I am confident it will be well thought out and will be very easy to sell. National has been down the complex policy route which Labour is stumbling into.

Posted by: tim barclay at July 26, 2005 09:13 PM

I don't know if it will get a lot of extra votes for Labour - many students are Labour or Green voters anyway and it will just confirm their position. This policy affects both of my children - one a recten graduate, one still studying, but I cannot see it persuading them to vote Labour. As for keeping graduates at home - who knows, but it will probably not make a great deal of difference as the work and experience is often to be found overseas. Also our young need to spread their wings and learn about the real world out there - education doesn't all come from schools and universities, life experiences count for a lot.
No hysteria needed yet - this caters to a small group of voters and many people will see through it. the 4 voters in my small family will not be bribed anyway (well, not by this.....)

Posted by: gingermum at July 26, 2005 09:17 PM

Rowan:

Sorry to disturb your stunning insight into my mind, but if National had put up a policy this fiscally and socially irresponsible I'd not have voted at all. But of course, us dirty Tories don't actually BELIEVE anything we say do we? Only smug, condescending arses like you occupy that moral high ground.

If I feel "pissed off", it's because Labour has spat in the face of people like me who strictly limited our borrowing, worked hard to avoid racking up debt, and made sacrifices to maximise debt repayment when it was possible to do so. I believed a student loan was a fair trade off for the taxpayer who subsidised 75% of my tertiary education - one that my working poor grandparents could never have dreamed of.

Why the fuck did I bother — so I can subsidise MORE welfare for the wealthy and middle-classes as well as help service the mortgage on my home, pay for most of my own health care needs, save for my own retirement etc.?

Posted by: Craig Ranapia at July 26, 2005 09:22 PM

Craig your comments are valid. I would have attended university had student loans been available to me in 1977. I thought the rebate National were offering, while not generous was useful. This is a blatant bit of bribery, but may not have a massive effect or ever be brought in. Stick to your principals, you will get there in the end.

Posted by: gingermum at July 26, 2005 09:29 PM

no craig..it's time to face reality mate..

that's a really good policy.and it's a vote winner..

("what was that national...?..tax rebates..?..no ..i think we'll go with the interest free, thanks")

i'd say things would be fairly grim over your kneck of the woods at the moment..

you are really being out-played eh..?..and it's only just started..you have the tax backlash to face yet..and those leadership debates..whew!

the next polls will be interesting..eh..?

phil(whoar.co.nz)

Posted by: phil u at July 26, 2005 09:30 PM

If people who have student loans buy this one, it is proof positive that money invested in New Zealand's so called "education" was completely wasted - they most certainly did not learn how to think, and as for the big picture and the long term view - forget it!

Posted by: camila at July 26, 2005 09:33 PM

Craig, I agree completely with your sentiment. Indeed Labour's policy creates even deeper social problems. (I haven't read through the 100 odd posts here so I apologise if I am repeating anything now).

Think about it in these really simple terms. I take a home loan at 8.5%, one has an incentive to repay it sooner to minimise the interest component and release myself from that debt as soon as possible, move on to a better life.

Now think about a $75k student loan interest free, I'd be looking for a 100 year term (if I could get away with it!) because there is absolutely no reason to repay the damn thing any faster. Oh, and I'd be a bit worried about any subsequent changes to that loan.

Students are being encouraged to subjugate themselves to the State for as long as they can. That puts our brightest in the same camp as beneficiaries and those Families I’m Working For. Do students really want that for themseleves? Oh, and forget the OE!


Posted by: Paul at July 26, 2005 09:33 PM

the stupid socialists are robbing mainstream new Zealanders. Like the "working for familiesZ" package it is communism by stealth and evil.

The best thing the Nats can now do is offer long term significant tax cuts which gives back to those who work hard to earn it.

Posted by: peter mck at July 26, 2005 09:35 PM

Who would you trust to look after your hard earned tax? A bunch of successful businessmen with real world experience who have given up their jobs because they believe that NZ has a great future (under a new government) or a sad group of Labour MPs who never have and never will get real jobs.

John Key is an excellent example of what Craig is talking about. He took the initiative to better himself, not bludge off the state.

I have faith that the commerce and engineering students will see through this, not to sure about the art students though.

Posted by: aaron at July 26, 2005 09:47 PM

To the happy Labour supporters:

Yep a good day for your mob.....

Don't get too cocky thou the Nats have the tax cuts up their sleeve which will be aimed at 4x the number of students with loans and 50 odd days is an eternity in an election race.

Posted by: Lindsay Addie at July 26, 2005 10:05 PM

Peter McK: "the stupid socialists are robbing mainstream new Zealanders".

Wow - I take it Peter that you comment means that people who are either getting a tertiary qualification, or have got a tertiary qualification in the past 15 years, or are partners, children, parents, or grandparents of such a person aren't mainstream then. After all, they're all the beneficiaries of this "robbing" of the "mainstream" you talk about.

The "mainstream" just gets smaller and smaller...

Posted by: Sally at July 26, 2005 10:29 PM

Ah, I get it. Labour wants to punish ( ie: take money off them via taxation) people for not having kids by paying for those that do - now they want to punish those who don’t study to pay for those that do. Perhaps next it will be punishing those who work by paying those that don’t

Oh that’s right, they already do. Sorry, What about punishing those who save by paying for those that don’t.

Oh that's right, they’ve done that too. That must be Jordan's home loan. Hang on, Jordan doesn’t need to get an interest break to save up or a home loan - he can get one now. Oh that’s right, that wont work either as his interest break for his home loan is paying off his interest that he has generated so far on his student loan.

What about paying people for taking out a mortgage, and rates, insurance etc with taxation generated from those that don’t… Much better idea. That will help pay for the student loan.

But again, you're debt-er off with Labour

Posted by: dave at July 26, 2005 10:39 PM

Hahaahha
Judging by the outpouring of grief from the right, I can assume Labour is on to a winner here. I have now heard multiple reports from all over the country about the celebrations from respective workplaces once they heard this announced. Ha-ha, please National give me my tax on my interest. Pathetic

O and Craig “A sad little vote buying exercise that's being over sold and will under deliver.”
I’m sorry but were you talking about National’s tax policy? Oh that’s right, that’s too shit to announce. Congrats, Don looked like a prize idiot again on TV tontine

Posted by: Pete at July 26, 2005 10:51 PM

One small bribe does not an election make

Allah protect us.

Posted by: TheProphet at July 26, 2005 10:52 PM

This is a brilliant piece of strategic policy by labour. Jordan is right. It will win the votes of those who are currently paying off student loans It will lose the votes of all those who work and pay tax and do not have student loans. But best of all, it will tell National what level of tax cuts they have to announce to completely neutralise Labour's bribe and get all the student loan payers rushing back to National for just one penny more. It might give Labour a two day blip in the polls but that's about all. Dickheads, they are.

Posted by: Adolf Fiinkensein at July 26, 2005 10:59 PM

I may decide to vote for President Bartlett....

Posted by: JBA at July 26, 2005 11:03 PM

Pete:

I happen to be rereading '1984', and funny how often *spontaneous* celebrations were a regular feature of the Ministry of Truth's telescreen broadcasts.

Must also congratulate you on the deep policy analysis - right up there with the media criticism.

If this is such a brilliant election winning policy, funny how scratchy the supporters are. Dissent getting to you, comrades?

Posted by: Craig Ranapia at July 26, 2005 11:18 PM

I like it, I like it that there is the possibility that my still young children may have something better to look forward to than what we have now.

I like it that this election may put National into irrelevance for some years. Just hope the Labour folk don't get too cocky though.

Back to Gingermum though, I attended University in 1978 and it was essentially free for me to do so. I Worked over summer etc, beer was not free then, still isn't.

Posted by: Backbite at July 26, 2005 11:35 PM

By the way have National got anything to come back with or do they need to be briefed by the officials after they are elected first.

Posted by: Backbite at July 26, 2005 11:46 PM

Backbite:

What do you mean 'come back' with - dish out a bigger, more irresponsible bribe? Well, I always hope that I'm not going to be treated like some cheap whore who'd going to go off with whover waves the most IOUs in my face.

Posted by: Craig Ranapia at July 27, 2005 06:29 AM

Whoo-hoo 117 comments, great but now I haven't got the time to read them to see if someone else has already made the point I want to make.

Students of wealthy parents have always used the student loan system as cheap loan scheme under this scheme labour are making it even more attractive.

When will this socialist government get over itself and start rewarding achievement instead of giving out hand-outs to everyone that are not based on merit with the farical notion that this is impartial.

Agggg......... why don't they combat the brain drain with a targeted scheme based on merit. Labour sucks!!!!!!!!!!!!!

Posted by: Gloria at July 27, 2005 06:58 AM

Well, Gloria, the student loan scheme pales into insignificance compared to extremely high (internationally speaking) levels of mortgage, credit card and personal loan debt.

Perhaps Labour's next tranche of middle class welfare will be to mysteriously find the billions required to wipe those interest bills? As I said above, this is fiscally and socially irresponsible - but I guess we're going to continue our fine Kiwi tradition of politicians running up bills for someone else - anybody else - to pay.

Posted by: Craig Ranapia at July 27, 2005 07:55 AM

Craig

You need to understand politics. All political parties offer bribes including National. If the tax cut bribe isn't one then the Pope is Harry Potter. Earlier today Rodney Hide called the National and Labour policies on student debt as a "bidding war", and of course he is right. The rules of the game are clear - secure political power at any cost and that is understood by every party and politician seeking to make a career out of being a political prostitute. I also don't believe that you would not have supported National if they had offered what Labour have offered to those students choosing to stay in NZ. If it had you would be crowing about it. Your are in denial if you are claiming you are neutral in terms of who you support.

Posted by: Rowan at July 27, 2005 08:02 AM

One further piece of information Craig. It would seem that all of the other parties Greens, United Future, The Maori Party, Progressive and NZ First are supportive or cautiously supportive of the policy. Only ACT have lined up with National in claiming it as a bribe. Of course it is - as are the proposed tax cuts by National.

Posted by: Rowan at July 27, 2005 08:06 AM

National's Tax Cuts. Yeah Right !!!

Posted by: blogger at July 27, 2005 08:17 AM

So, let me get this right.
1. No money available in the budget for a decent tax break
2. Post budget there is $450 million additional money found for roading.
3. Post budget – election promise of $300m additional funding to enable student loans to be interest free.

Sounds cool but let us go back to the budget and Labour ranting on that there was no spare money. So please can someone tell me where $750 million has mysteriously appeared from.

What we have here is an integrity issue, which needs to be brought into focus.
Sure all the students will go yippee and vote Labour – of course in two elections time they will go hang on, now I am getting the shit taxed out of me and time to switch votes. Labour has created a new breed of switch voters.

However, back to the main point, Cullen according to me has lied. Now why would you want a person who is a liar not only in Parliament (oops sorry most of the politicians are liars), but also as Minister of Finance. Gosh, I pick post election budget if Labour still somehow retain their position will raise or create another tax/levy to pay for this $300 million or defer the policy.

So if National and all the other parties put there moral and ethical hats on for a while they should attack this point all the way through to and beyond the election. As, eventually the voters will see what liars Cullen et al are and that as voters you cannot afford to have such liars in power this time around – the damage will be so great New Zealand will be stuffed for at least a quarter century.

As for me, I will be out of here if Labour return as under them this country is not worth what you get for your tax dollar.

Posted by: Andrew at July 27, 2005 08:22 AM

Rowan:

I've been active in politics for fifteen years, so I don't need any schooling from you thanks. And I don't pretend to be "neutral" on anything - I'll make my arguments, and you can accept them or not. But why not accept that I sincerely believe what I say, rather than constantly accusing me of lying?

This might be hard to understand, but just because I'm a National voter doesn't mean I say "my party right or wrong" or even find it hard to give Labour credit when I think credit is due. This policy is spectacularly good politics, but very bad public policy that is socially and fiscally irresponsible. Despite what you keep asserting, I WOULD NOT SUPPORT THIS POLICY IF IT HAD BEEN ANNOUNCED BY BILL ENGLISH INSTEAD OF TREVOR MALLARD! GET IT? HAVE I MADE MYSELF PERFECTLY, CRYSTAL CLEAR?

The one thing I don't want to see National do is get into a "bidding war' (as Rodney puts it) because, you know something, they're not playing with their own money. People like you and me have to EARN the money we pay in tax - and I think I have the absolute right to say when it's being squandered for short-term partisan advantage.

You also describe National's view of tax cuts as "a bribe". Well, once more, your arrogance annoys me. I have profound differences with my left-wing friends on the nature, scope and proper powers of the state — philosophical difference as old as politics itself. Tax is part of that debate. But, again, ideologues just can't accept that other points of view are sincerely held and open to debate. No, us dirty righties are con-men seeking to bribe the stupid sheeple.

I also don't buy the argument that "all of the other parties... are supportive or cautiously supportive of the policy" therefore it must be correct. So, if everyone else in the room supported something you considered deeply wrong, then you'd keep quiet? I'd consider that moral and political cowardice in the face of the tyrrany of the majority.

Once upon a time *everyone* in Parliament thought that homosexuals should be in prison, women were unfit to exercise the vote, Maori would quickly and quietly follow the Moa into extinction, it was acceptable to levy a racist and discriminatory poll tax on Chinese etc. etc. etc. I'm glad the people who thought otherwise didn't keep quiet.

Anyway, my point Rowan is could you please make your own arguments instead of telling me what I think? It's tiresome, offensive and says more about your intellecutal poverty than me.

Posted by: Craig Ranapia at July 27, 2005 08:46 AM

I don't have a student loan. I am doing a BBS extramurally....at my cost whilst I run a business with around 50 odd staff. So I consider myself mainstream... I work hard, I accumulate wealth for my future, I continue learn, keep fit and the most important of all, set a great example for my three kids. However because I have never used the student loan system I need some understanding from those of you who have a loan.

Last night on Campbell live he had two students on who were both doing BA's. One of them is 22yo and has accumulated a loan of $48K !!

Can someone do the math for me and tell me how this happened? I would have thought her learning costs would have been around $15000 max?

The rest is obviously 'living allowances'. Now I may be naive but....are we not financing wasted money and to add insult to injury, they can now do so INTEREST FREE!!!

So once someone has answered that question, please answer this.....

WHY SHOULD I PAY FOR THIS?

Posted by: morg at July 27, 2005 08:54 AM

Andrew - how much will $750 million give you in tax cuts?

Work it out...

Posted by: weizguy at July 27, 2005 08:55 AM

Sally. This is why Labours scheme is messed up...

When I went through University 5 years ago, I worked all summer to raise approximately half my course fees (about $2000) and I worked part time during the year so that I didn't have to borrow the living allowance portion of the student loan ($150 per week). I came out of university with just over a $6000 loan and a degree

If I was to go through university under the new labour scheme I would bank my $2000 saved over summer and borrow the full course fees (hey, it's interest free). I would live off my part time job but also draw down on the living allowance portion of the loan and bank it ($150 per week while studying = around $5000 per year).

My bank account at the end of 3 years study would be (assuming I had the discipline to not spend it) $21,000. (3x $2000 summer savings + 3x$5000 living allowance loan). A nice little saving. TWENTY ONE GRAND IN THE BANK.

My loan would be $27,000 (3 years course fees = $4000 + 3 years living allowance = $15,000).

Under Labours new scheme and current interest rates, my loan would be growing at $0 per year and my bank account would be growing at $1200 per year (pre tax and courtesy of the tax payer).

My bank account would keep growing and growing through the power of compounding interest while my loan stayed where it was (its value continuing to diminish through inflation). I would have no incentive to pay that $27,000 back early, in fact, my incentive is to leave it as long as possible to watch it eaten away by inflation.

Archon

Posted by: Archon at July 27, 2005 09:04 AM

craig..you said.."..Well, I always hope that I'm not going to be treated like some cheap whore who'd going to go off with whover waves the most IOUs in my face.."

if i could just carry your cheap whore analogy a bit further down the road...

don't you realise that this is the only time in the electoral cycle that we are not on the receiving end of sexual congress....?..call it the whores' revenge..if you will..

this is where we get to do it to them..

phil(whoar.co.nz)

Posted by: phil u at July 27, 2005 09:07 AM

For once, phil, you not only make sense but 1) I'm laughing with you not at you, and, 2) fair point. Guess it had to happen sooner or later. ;)

Posted by: Craig Ranapia at July 27, 2005 09:13 AM

Phil, that wasn't only comprehensible but 1) I'm laughing with you not at you, and, 2) fair point. Guess it had to happen sooner or later. ;)

Posted by: Craig Ranapia at July 27, 2005 09:15 AM

So Labour wins the student vote. How ambitious. What will they target next? The union vote?

I don’t know what percentage of New Zealand students have student loans, but can someone please explain why this wouldn’t rise to 100%? Any student who saves for their fees, or gets it from mummy and daddy to pay, pays from them through other sources would be crazy not to take a loan and put their alternative funding in the bank. Has Labour accounted for the fact that every student will borrow in their cash flows? I feel sure this would have been spotted in the budget.

Posted by: Glenn at July 27, 2005 09:17 AM

I've just had a naive girl at work complaining to me about how bad interest is on student loans. She doesn't seem to understand that she took out the loan and understood the conditions that came with it, therefore she is responsible for paying it back. Then she complained that the interest rate is too high on the current scheme. Where do students think this money comes from? A magic printing press at the reserve bank that doesn't have to be accounted for.
Then when pressed about why all these people think they should go to university and get degrees that they have no job propects for she claimed they are young and deserve some fun.
What the hell is wrong with these people? If I want fun I'll go to the beach and it's free (or is Labour going to change that as well).

Posted by: aaron at July 27, 2005 09:28 AM

Weizguy

I have already accepted my fate that I am screwed about living in a country that overtaxes whilst not being fair to the respread of the tax dollar.

Whilst acknowledging tax is a key issue. (Also heard the targetted 10% of taxpayers at the 39 cents level is now hitting 20%)

My point is about the ethics of this all. This is another key issue this election and one that could have more sway and power than any tax break/incentive or interest free loan never to be repaid, leave to my children to sort out.

Posted by: Andrew at July 27, 2005 09:29 AM

Weizguy

I have already accepted my fate that I am screwed about living in a country that overtaxes whilst not being fair to the respread of the tax dollar.

My point acknowledges tax is a key issue. (Also heard the targeted 10% of taxpayers at the 39 cents level is now hitting 20%)

The focus was about the ethics of this all. This is another key issue this election and one that could have more sway and power than any tax break/incentive or interest free loan never to be repaid, leave to my children to sort out.

Posted by: Andrew at July 27, 2005 09:34 AM

Backbite - yes acknowledge your comments, but the loan would have given me more motivation I guess to attend

Posted by: gingermum at July 27, 2005 09:46 AM

cheers craig..

phil(whoar.co.nz)

Posted by: phil u at July 27, 2005 10:02 AM

HL Mencken said it: "Government is a broker in pillage, and every election is a sort of an advance auction of the sale of stolen goods."

I'm going to get this as a tatoo.

Posted by: Peter Stuyvestant at July 27, 2005 10:02 AM

I worked pretty much full time to pay for my fees and to buy food and other such luxuries. I paid my fees at the start of each year. This was before the interest-free during study program.

Heres what I would have done if the interest free loan during study policy was in place back when I was at uni. I would have saved my money, taken out an interest-free loan, put the money on term deposit, taken the living allowance, invested that every quarter in another TD. If I timed it well at the end of my study I could have paid everything back and still had several thousand dollars that I wouldnt have had before.

If the proposed policy was in place, I would have done exactly the same thing, except I wouldnt have paid it back at the end. My income wasnt too high after study, so the minimum payments would have been very low.

I would have also opened an account with every bank that had interest-free overdrafts for student. Borrowed the max and invested in TDs. By the end of study I would have made a not insignificant amount of money. Certainly more than I would have made if my effort was charged at my hourly rate at the time. It would be well worth the effort.


Also, I have to laugh at those people that say that they wouldnt be borrowing anyway, because they think it would be immoral, and yet who SUPPORT this immoral policy!

Posted by: Kimble at July 27, 2005 11:43 AM

"As you should be aware, the student loan scheme is CURRENTLY 100% INTEREST FREE for students.

If there was any credence to your logic, then the borrowing rate for current students would be 100%. According to your (unsourced) figures, the current rate is 55%."

How many students do you know re capable of repaying a student loan in full at graduation so that they avoid interest charges post grad? Interest is the brake that prevents this. Even if there are any that could pay it in full at graduation the incentive to repay their loan at graduation has just been removed.

Do you people understand compound interest or even the basic premise of the time value of money. For chrissake studying is an investement in yourself so why shouldn't you pay some of it - including the concept that borrowing attracts interest.

These same people moaning about having to pay interest on their student loans at a paltry 7.00% or whatever it is will be lining up buy a car or a lounge suite or stereo at 19% inside a year of graduating.

Posted by: Hobbo at July 27, 2005 12:30 PM

Oh my god, all you tories are practically apoplectic about this! What a beautiful sight. This has made my day.

Posted by: Hahahahaha at July 27, 2005 01:11 PM

Kimble - there are a couple of problems with your master plan (I think these have already been pointed out previously in this thread).

1. Your course fees have to go to an education provider. They don't just give you a suitcase full of cash that you can go and invest.

2. Your living allowance is paid out on a weekly basis. You'd have to transfer the hundred and fifty dollars into your term deposit account every week.

You DO get a maximum of one thousand dollars course related costs every year which you could invest, but the catch here is that you have to be able to prove that you need that money (typically your university or Polytech will provide a cost estimate. So you could invest that, but then you'd be paying for your textbooks out of your own wallet.

It seems to me that the unknown factor here is whether this will discourage our graduates from leaving the country permanently. If it reduces the number of skilled workers emmigrating then it will pay for itself dozens of times over.

Posted by: dim at July 27, 2005 05:27 PM

The other catch, of course, is that if you're earning over 17 grand then IRD will instantly start to tax you at an additional 10% to pay back your loan.

Posted by: dim at July 27, 2005 05:54 PM

This whole thing is one big rort waiting to happen, and despite what the govt are saying about culling non productive courses at education providers, some smartish bugger will have a look at the parameters, and working within the rules will start to provide some training in an area of need, eg some one could offer a course in Dingo excavation driving course, get the student a license and some rudimetary knowledge to allow them to shift a pile of dirt, charge the buggers 25k for the course, but give them the dingo on graduation. This way a small business owner will be able to get an interest free loan to start up their new venture. Best of all, if it falls over they don't have to worry about repaying the loan, and can go find some other new venture to.
Another avenue to make this thing a rort is to apply for scholarships, and once successful in obtaining that funding, draw down the whole loan entitlement and invest it.

Posted by: pundito at July 27, 2005 05:54 PM

dim,

1. i included the initial costs in the my second(?) post
2. i realise now that the students benefit gets paid weekly, and have included this in my other example.

You may be able to poke holes in the figures and the assumptions, and maybe I went a little too far with the first example trying to prove my point. But in the end, this policy WILL mean an increase in the total student debt, and will have very little effect on top grade graduates heading overseas. Let me explain the point,

Recent graduates arent really the ones we are sorest about losing. It is the highly qualified graduate who has several years experience we miss the most. With these changes the experienced graduates will have paid off a little more of their debt before they leave, but they will still leave.

Why? NZ is boring, always has been.

Why else? NZ wages are too low. Few people run off overseas with their student loan at the forefront of their mind. Changing the student loan structure isnt going to change their minds, as I dont think it makes too much difference to them.

Of those that DO want to pay down their loan to a respectable level before heading overseas, all this will do is make that happen faster than it ordinairily would.

If you want to stop losing skilled workers you need to start paying them more, and a thinly veiled government hand out isnt going to be enough. In some ways a government hand out is a disincentive to stay.

Government could do a hell of a lot more to keep skilled workers by getting the hell out of the market and letting it grow at its own pace. Government naturally retards everything it touches. Lower corporate tax rates so that overseas companies have a justifiable reason for shifting/opening operations in NZ. They will bring the jobs that will hold the skilled workers here.

Posted by: Kimble at July 27, 2005 06:36 PM

Kimble - I think that the idea is that by the time people have spent enough time in the country to pay off their interest free loan they'll have had kids, bought a house ect and won't be able to relocate so easily. Maybe it'll work, maybe it won't.

It'll take more than just lower tax rates to bring significant amounts of international corporations over here - New Zealand will never be able to seriously compete with countries like Singapore or China (or South India), simply because of our labour costs, environmental laws, population and geographic distance.

The notion that if the government were to remove itself from the market we would be flooded corporations with high-paying jobs is a dream that isn't going to come true.

Posted by: dim at July 28, 2005 08:49 AM

Lowering the company tax rate would be a good start, dim, and might mean that fewer NZ companies head overseas (which is just as important.)

"I think that the idea is that by the time people have spent enough time in the country to pay off their interest free loan they'll have had kids, bought a house ect and won't be able to relocate so easily. Maybe it'll work, maybe it won't."

This sounds very cynical. Keep them here long enough and they wont be able to leave?

Posted by: Kimble at July 28, 2005 11:43 AM

I never went to uni, I left school at 15 and have been a taxpayer for the past 22 years. Raised two girls, one at uni now. I have been told everyday by the newspapers, tv and government all my life I have to pay and work hard for what I have. Now they are telling me my daughter can get an interest free loan for her education, I am worried because her and her friends think labour has answered all of their prayers. A 2 year stint will now drag out to 3 or 4 years at uni for them but I can see labour hitting me in the pocket again. And when I see that stinking ad with Fred Dagg singing "We don't know how lucky we are, mate" I think yeah mate only for bloody students riding on my back. Give me a tax break!!!

Posted by: Donna at July 28, 2005 11:48 PM

Dumb question for the day - doesn't it say that there will be an amnesty period in 2006 where those who return from overseas OR enter into a repayment arrangement will not be charged the penalty interest for any overdue payments - does that mean the borrowers who are overseas & not currently paying anything off their loans can remain overseas & start a payment plan without being penalised?

Posted by: Jenna at August 2, 2005 07:33 PM
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