As expected...

The annoucement has now been made, with National pledging a tax refund on the interest paid on student loans.

Good things about this:

• it would help recognise that loans are a problem
• it would be an automated refund - student loan borrowers wouldn't have to fill in an IR3 just to claim it
• it would help cut repayment times for student loans

Bad things about this:

• It'd be regressive; higher income earners would gain more
• it wouldn't tackle the causes of debt - which are high fees and limited access to allowances

Look forward to seeing the rest of what they come up with.

Comments

[tim barclay]

There you go again about the poor. Look so long as people are not starving in the streets and have a roof that is about as far as the taxpayer is prepared to do. The Labour Party thinks the Government should use the tax system to punish the hardworking law abiding and successful to lift up redefinitions of the poor. The Labour Party poor even have cell phones in this country. Well stuff them.

[JakeQuinn]

Excuse me? That sounds freaking sweet? ... And I’m a youth labour member.

Labour better match it or 10's of thousands of us will jump ship.

By the time I’m finished ill be well over 50k in debt, and I don’t have to tell you what the interest on that is going to be like.

I’m not at all interested in rhetoric about the causes of debt. Right now, I’m looking for some kind of interest tax relief or an incentive scheme to stay in NZ after I’m done educating myself.

I’m totally happy to hear this policy announcement from National. And CAN NOT WAIT to hear what Labour has in reply. It best match it or beat it.

--

concerned centrist Labour member and student with huge debt.

[Vanzyl]

Jordan, Please explain how labour in the last 6 years have managed to help students in this area?
Please also explain that if this does not go far enough, just how much further labour would go
and if they can go further, just why has it taken Nats to push them to do so after 6 years
Or be some-one with just a teeny weeny bit of integrity, and say, Wow well done Nats this is a great step in the right direction. Or is that to much to ask?

[weizguy]

Vanzyl

Fee maxima.
Interest freeze while studying.

"just why has it taken Nats to push them to do so after 6 years?"

Just why has National done nothing in this area for 6 years?

Labour were always going to release a policy. Despite what some may think, there is no quick fix for the loans bulge. Labour have done things (over time) to ease the burden. It's saved my friends some thousands of dollars.

I think it's a good policy. It's an honest policy. Nice way to swing the debate back the other way.

If I was bitter, I'd call it a distraction from the Iraq issue.

[Paul]

Tim

"that is about as far as the taxpayer is prepared to do.":

No tim that's all you can even stomach being done let alone actually do this for these poor buggers.

You're one miserly SOB aren't you. I seriously hope that you never have a work place accident and have to rely on the state for the rest of your life, cause with people like you, they ain't getting nothing.

[Paul]

Jake

"concerned centrist Labour member and student with huge debt"

Sounds like you're just dying to become a middle income Nat/act supporter anyways. I think you're lost the left. Good luck. My debt $65K

[Paul]

I'm waiting to see what impact that this has on Women and those who aren't likely to end a partner at Phillips Fox (as is the premisconception of Uni grads).

It's a genuine question, considering that women already aren't likely to pay off thier loans before they die, and even less so now.

But come on Tim, defend this to the hilt, we'll see the true colours coming out. Shall I preempt you?

"People without good high income prospects shouldn't enter varsity"
"The poor shouldn't go to varsity"
"Why would a woman go to varsity"

We know you're thinking these things.

To tell the truth,

Both Lab and Nat have been absolutely crap at this, and either team are only ever going to pay lip service to it, to attract the centralist swing voter (jake). That is until someone comes up with the solution as to why student debt is over $6b.

[Greg Stephens]

National's promise does look rather thin. Given that it is expected to cost something like $70 million, it is going to do bugger-all to the level of debt.

"For a student with a $30,000 loan, earning $45,000 a year, this could reduce their tax liability by up to $693 a year" - Bill English
a scheme which wiped off interest while living in NZ would save around $1500 (given a 5% interest rate).

The Nats seem to have one policy and are applying it to everything - meager tax cuts. Tertiary education? Meager tax cuts. Health care? Meager tax cuts. Roads? Meager tax cuts. And so forth.

[Rich]

It would amount to bugger all money for most people.

On (say) a $30k income student loan repayments are $115 a month. With a $10k loan, interest equates to $58 a month. Tax on that comes to a meagre $11.

Since student loan interest is based on commercial rates, and Brash's tax policies will send these up substantially, most students will actually wind up worse off.

[Rich]

It would amount to bugger all money for most people.

On (say) a $30k income student loan repayments are $115 a month. With a $10k loan, interest equates to $58 a month. Tax on that comes to a meagre $11.

Since student loan interest is based on commercial rates, and Brash's tax policies will send these up substantially, most students will actually wind up worse off.

[Jordan]

Jake, no, you don't have to tell me, because I have a loan about that level myself, now, three years into the workforce.

Vanzyl, it might be a step in the right direction, but we don't know, because we don't know what the rest of their policy is. If it's paid for with faster fee increases and a cut to allowance entitlement then it's certainly not a step in the right direction.

As for what Labour's done, the interest rate freeze while studying plus the 50/50 repayment rule, which means that loans do fall if you're earning (unlike the old days) cost $660m over four years when introduced. That's a hell of a lot, actually.

As for what Labour's going to do - that'll be announced in good time by the appropriate people. This is not the time and I am not the person. :-)

The tax refund thing would work well for me, because I'm on a relatively high income, but (apparently miraculously) I don't really give a damn about my own position. I'll be fine at the status quo or with whatever anyone does, cos I can pay anyway. My concern is stopping future generations being stuck under a mill-stone.

[sagenz]

curiousity Jordan/Jake if you dont mind my asking. How do you get 60k in debt over 3-4 years at University? I seriously cannot comprehend from my pre fee time at uni how even with fees you could accumulate that much debt. If there is a rational explanation you may get a convert to lower student fees.

[sagenz]

and rich you will have to keep repeating that stupid interest rates will rise mantra until it becomes your truth. Dr Brash tamed inflation in NZ and you can be sure his policies will be fiscally responsible enough to maintain low interest rates.

[Brian S]

So, Jordan, when you do get a tax cut, you will be kind enough to hand it back to the IRD?

[Mark Ellis]

Nice for some people to have an interest rate freeze while studying, there is a large number of student loan borrowers that had interest charged while studying.

Therefore, anything that increases the repayment to reduce the overall loan balance is a good thing.

If Labour can come up with something better then they will attract my vote.

And has anyone notice that interest rate charged on loans has not changed for five years or more year (it has always been 7% per annum). This means either the inflation rate has been the same over the last five years or the goverment charges the real rate of interest up to a maximum of 7%. This means if inflation is a 2.8% the real interest rate charged is 4.2%, but if inflation drops or rises the real interest rate charged changes acordingly regardless of the actual cost to borrow the money. Which since Labour uses from the surpluses should be nothing.

Anyway if Labour sees the Student Loan debt as a problem they could use one years surplus of 8bn and wipe the Student Loan debt of every person in NZ.

Or how about universal student allowances which would reduce the amount students have to borrow.

The changes made in the budget last year meant the number of people who could qualify for a Student Allowance dropped.

The number of Students that received a student allowance in 2004 was about 60,000 students, this year it is estimated to be about 45,000.

I saw a poster put out by MUSA saying the policy changes were like rearranging the deck chairs on the Titantic.

Anyway the changes meant the more students are forced to borrow from the student loan scheme compared to last year.

[JakeQuinn]

I would like to begin by stating that my initial enthusiasm for nationals unveiling of their debt relief policy was a little overzealous. After taking some time to consider what it really means, and how little money it actually equates to, I have toned my enthusiasm down.

However, I am excited that National has brought this line of argument forward, as students and student debt have thus far not featured highly in the election run-up. I am sure, Labour can and will do better – one way or another.

Another question I am concerned with is – Would National abandon Labours progress in the area, i.e. interest free loans while a full time student? (If they would, any money saved in a tax break would surly be offset by money spent on interest whilst studying)

To answer the question… "curiousity Jordan/Jake if you dont mind my asking. How do you get 60k in debt over 3-4 years at University?"

If you study full time without financial support from your parents (and you are not entitled to an allowance) you will find yourself needing to borrow the $150 a week that Studylink offers. If you borrow for your fee payments, plus $1000 per year for ‘course related’ costs, your yearly total will be around 10k+.

For people who actually finish their university degrees, it takes on average 3.5 years. So that would account for 35k and that’s assuming that you don’t change halfway through, or do an honours year, or any post graduate study… so it is pretty easy to see where it all adds up.

[Vanzyl]

I have had two sons and two daughters get their tertiary education i this country. First let me say that I think they had the best of an education system they could have got anywhere. All four could have asked me to support them...all four declined....all four thinks that today's announcement has been the first i 6 years that would benefit them.
Jordan and mates...work hard and achieve.....then be magnanimous in accepting that for the first time in 6 years we have a policy that rewards students....

[GeniusNZ]

I suggest economically good courses should be free. Eg engineering AND they should have higher student allowances.
economically Bad courses should cost eg ancient history.
Students are not entirely economically rational they need a bit of help to make it more obvious

[GeniusNZ]

> i.e. interest free loans while a full time student?

this encourages students to borrow and invest (as they do)
so loans should be set at normal borrowing rates. Allowances probably should be higher though because we dont want students to be on a day to day basis poorer than unemployed poepel that is rather unfair.

[Michael Wood]

Jake hits the nail on the head - a fancy rebate scheme while not addressing the causes of debt is like trying to put the Carbon Monoxide back in the exhaust pipe. Your better to make sure the car is tuned in the first place.

National's record was of uncapped fee rises, and cuts to the Student Allowances scheme during the 1990s. Under these conditions debt will rise regardless of the rebate.

[tim barclay]

I am glad the issue of fees is coming up. Perhaps we should look at the costs of running a University particularly the pay conditions of Unionised staff and the campaign by students to increase staff costs.

[Graeme Edgeler]

Those with higher incomes will not gain more:

People on lower incomes take longer to repay their loans;
Everyone complains that this means they pay more in student loan interest;
They actually do pay more in student loan interest;
Therefore they will have more money to deduct from their income, and will receive a greater tax deduction over the course of their loan.

They just won't get it all staright away.

Put simply: high income people will get big rebates for a small number of years; low income people will get smaller rebates, but will get them for much longer.