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.