Lightening the load

Written By: - Date published: 12:35 pm, July 18th, 2008 - 12 comments
Categories: education, election 2008, labour, national - Tags:

A universal student allowance of $350 isn’t going to happen. It’s too expensive and would bar major new spending in any other area. But more relief from debt would be welcome.

There’s an increasing recognition that student loans are locking young people out of the housing market, making them perpetual cash-cows for the property speculators in their parents’ generation. 500,000 Kiwis have loans. Interest-free loans have gone some way to reducing that burden and enabling loans to be paid off faster. But if you’re in you’re mid twenties to mid thirties and still carrying a loan of $30K (78,000 people owe over $30K), you’re a long way from getting a deposit together, and you’re ability to save is curtailed by 10 cents coming off every dollar you earn over the threshold to repay your loan.

A smaller increase in the allowance, increasing parental income thresholds, lowering of the age at which parental income is considered, and gradual abation of the allowance due to other income would all be good moves to help poepl avoid building up debt and would considerably cheaper than a large, universal allowance.

A policy to forgive some of that outstanding debt could be a really positive move for this generation. It would have to be larger and fairer than National’s 10% top up for voluntary repayments, which favours those wealthy enough to make voluntary repayments and would cost less than $10m. Perhaps forgiving 5% of their student loan each year a person is resident in NZ after study would work. It would also further incentivise newly qualified Kiwis to stay here. My rough calculation is that a 5% annual cut in loan balances would cost $250 million a year (that’s based on the fair value of the total loan debt). Unlike National’s policy, the most relief would go to the most indebted (ie the ones who have taken long, expensive degrees like medicine), rather than to the most wealthy.

Labour has been good to students and there’ll probably moves on allowances and/or loans in Labour’s election platform. But don’t expect massive universal allowances any time soon.

12 comments on “Lightening the load ”

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  1. SweeetD 1
    18 July 2008 at 2:21 pm

    I am in my mid 30’s. I own my own home. I had a student loan. I paid that off. I was also thinking about my long term prospects when I undertook my initial course of study, ie, will this bring a return on my investment? There is no difference between investing in plant machinery and investing in yourself, both costs money and you want to see a return. How many of these mid 30’s folk just picked stupid study options that result in no real jobs options? Yeah its sad, but they only have themselves to blame.

  2. DS 2
    18 July 2008 at 5:40 pm

    “There is no difference between investing in plant machinery and investing in yourself, both costs money and you want to see a return.”

    Yeah, God forbid we have students studying History, Classics, English, Political Science, Theology, Mathematics, Biology, or Chemistry (rather than Accountancy, Law, or Economics) because they happen to enjoy it and it is what they are good at.

  3. Robinsod 3
    18 July 2008 at 5:45 pm

    Hey sweet – you say you had a loan – did you get an allowance too?

  4. sweeetd 4
    18 July 2008 at 5:50 pm

    DS

    if you enjoy it, good. Just don’t winge that you have a big loan that you can’t pay off at the end. And, do we really need more people studying poli science 😉

    Sod

    No, I worked part time.

  5. fiona 5
    18 July 2008 at 5:52 pm

    Steve, I am not sure where the $350 comes from. Is that per week or per fortnight? If it is per week that is alot of money, when the unemployment benefit ranges from $153 to $185 per week.

    I would like to see a universal student allowance and reasonable fees (cf $10k per year for medical students). Perhaps income testing government superannuation could help fund it.

    SweetD, I agree that an education is an investment, but if we as a society invest in our young people, then they in turn are more likely to invest in NZ.

  6. sweeetd 6
    18 July 2008 at 6:14 pm

    Fiona

    Absolutly agree with you. Question is, how far to we invest? At some point there needs to be personal reponsibility, where does one start taking ownership of their own actions? If you spent many years studying some obsure subject, have a small fortune in debt, whose fault is that?

    Regarding your previous point, as I have had very recent experience with the hospital system (auckland hospital, very excellent, love ya lots!!!!) with a very old grandmother, I would love to see some incentive towards those subjects we need, doctors being the first example. Dunno, govt. funded lowering of the fees for doctors? All comes down to a simple supply and demand curve at the end of the day.

  7. fiona 7
    18 July 2008 at 6:44 pm

    Sweetd, I don’t support the proliferation of government funded courses from some private providers. For example, some young people are spending thousands on courses like hairdressing when they could do their training as an apprentice, and often do after they finish their course.

    It would be reasonable to target courses of national importance such as medicine, and other health-related courses, science etc, to encourage students into areas where there are skills shortages.

  8. killinginthenameof 8
    18 July 2008 at 6:50 pm

    “fiona

    Sweetd, I don’t support the proliferation of government funded courses from some private providers. For example, some young people are spending thousands on courses like hairdressing when they could do their training as an apprentice, and often do after they finish their course.”

    It woudl be ideal if they took on more apprentices, but alot of places wont take on someone who hasnt done one of those courses is the other side of it I guess.

  9. Proctor 9
    18 July 2008 at 6:59 pm

    I’ve got an MA and now work in Finance – earning a reasonable salary.

    I’ve got a student loan of over $60,000 as my folks – although earning more than the limit – were unable to pay my way. Always bugged me that people with family trusts could screw the system and get the allowance on top of the top-ups from their parents.

    While I’d probably prefer the number of institutions eligible to a student allowance, I’m all in favour of the universal student allowance. Unsure where you picked the $350pw figure from SP – currently I think it’s around $180.

    Not in time for me – but I wouldn’t want anyone else to have a loan of my size. I pity the doctors (and am inspired by them)

  10. Tane 10
    18 July 2008 at 7:15 pm

    As I understand it the $350 a week figure was raised as a possibility in the Dom Post this morning.

  11. Draco TB 11
    18 July 2008 at 11:08 pm

    $350/week is too much and should be around the $200 mark. I also think that the SA should be higher than the UB because we want people to be incentivised to up skill. ATM, I believe that the difference is mainly due to the Accommodation Supplement – A person on the SA will get less per week from the AS than someone on the UE even if they’re in the exact same circumstances.

  12. blocker 12
    22 August 2008 at 5:04 pm

    I’d be happy with ANY universal student allowance, I payed taxes for 20 years and am now studying to be a teacher but will have at LEAST a $30000 debt by the end and like many adult students(who are a growing part of the student demographic) my wife earns just a little bit too much(bugger all) for me to be eligible for an allowance. We will soon have TWO generations carrying massive student debt.

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