Tuesday, July 26, 2005

Historic movement on student debt

"If implemented, Labour's tertiary student support policy, including the introduction of no interest on loans while borrowers are in New Zealand, would be the most significant blow to the $7 billion debt monster since the student loan scheme was introduced in 1992." NZUSA Press Release.

Wow. Praise for Labour's tertiary education policies from NZUSA has been as rare as lesbian unionists at John Tamihere campaign fundraisers. Todays policy announcement will see all interest on student loans scrapped for graduates who remain in New Zealand. Access to student allowances will also continue to rise, meaning that people will need to take on less debt in the first place. This is a huge step in the right direction.

You can use the debt calculator on the Labour site to work out how much you might save under the policy. I entered in the figures for a friend of mine with post-graduate qualifications who has a $50 000 loan, and is on a $55 000 salary. Under the policy he will pay off his loan 7 years quicker, saving $47 000.

I like the policy because it cleverly ties together a solution to the problem of growing student debt with a positive step to encourage young people to keep their skills and talents here in New Zealand.

This policy will form part of Labour's pledge card along with the already announced rates rebate policy. I'm extremely pleased that the campaign is now moving on to positively outlining Labour's vision for the future.

36 comments:

Anonymous said...

Michael,

This is great news! This Kiwi expat is very impressed.

I'm studying overseas for a doctorate (having studied in NZ) but I want to come home and teach afterwards. I have a big loan from earlier study and this announcement is a great move towards getting people like me to come back home.

Best of luck with the campaign, two ticks for Labour are coming your way!!!

Educated Kiwi Expat

spooks said...

Just a question at this stage please Michael.

Last time there was a kerfuffle over student loans, Labour got lots of votes for their grand scheme for reducing the burden. It was removal of interest on loans while students were still studying. At the time, the opponents suggested that the cheap finance would result in the student debt blowing out.

Were they correct in predicting that, Michael?

spooks said...

Incidentally, it is ONLY Michael's reply that I am interested in. No doubt others will comment, but the q & a is for the candidate.

david said...

I too am an educated kiwi overseas, but sorry, this policy does NOTHING to make me want to go home.

The policy apparently only applies if you are in New Zealand - and once your loan is paid off, then what?
You're still being heavily overtaxed. May as well go back overseas again... What is Labour's policy to prevent people out of debt from buggering off overseas to more prosperous places (like where I am)

ACT's policy is by far the most attractive - not to select groups of voters - but to all New Zealanders. Give me a top rate of 25% tax, and I'm much more likely to go home and contribute to society there instead of here. Make it worth my while for my LONG TERM FUTURE. I'm educated - I'm doing fine - I don't need stupid petty short term bribes before I start getting slammed by high taxes again.
Besides, it would be faster to repay loan's under ACT's policy anyway.

I hope for New Zealand's sake that people get a clue about this.
New Zealand's goal should not be to sucker people into staying in New Zealand while their are part of a specific voting demographic - the goal should be to make New Zealand an attractive place to live and work, no matter who you are. Too bad politics and principles are mutual exclusive for the Labour party.

And by the way "Educated Kiwi Expat", if you are voting from overseas you'll only be getting a party vote.

Anonymous said...

David

New Zealanders pay a low to middling amount of tax by OECD standards.
They are not overtaxed.

There are certainly higher salaries on offer overseas, and higher salaries are worth infinitely more than lower rates of tax.
But the salaries issue essentially come down to the overseas ownership of the economy and, looking forward, the poor leadership of New Zealand's business elite, which releases an inordinately high proportion of profits in dividends rather than re-investing in higher value product.

Anonymous said...

The total level of student debt is not a problem if it is a consequence of more people being able to get access to tertiary education through the scheme, and the conditions for the repayment are less burdensome and debt is disposed of more quickly.
The aggregate figure can be a red herring in my view,(though inevitably it has been used to make a point by the NZUSA, and probably Labour) and is being employed as such by National now.

The amount each student can borrow is still strictly limited, and contrary to myth, does not arrive in a lump sum for quick investment on the stockmarket, but by instalment.
The conditions for actually receiving student loans could feasibly be tightened too - up until now, because the loans have represented a commercial asset for the state, access to them has been pretty easy, even if the amount received per student has been limited. In other words, will it be that in order to receive a student loan you will have to demonstrate need?

Labour's changes can be expected to lower the average student debt to begin with, as access to student allowances is widened, and reduce the repayment times considerably.
It's a top move, but I just wonder if the logical corollary is that student loans get given out on more of a needs basis from now on, rather than 'anyone comes, anyone gets'.

spooks said...

Labour has one over-riding objective -- to create as many beneficiaries as possible. This creates another several hundred thousand, as the rates rebate scheme creates another several hundred thousand, and as working for families creates hundred of thousands more. That's about a million more beneficiaries than the less than half a million than we have right now. Tripling the number of beneficiaries is something that NZers are suddenly going to realise, is a very bad thing.

Anonymous said...

Who exactly who isn't a beneficiary when the logistics and economies of scale associated with the co-ordinated expenditure of taxation revenue means people have more comprehensive, reliable and affordable access to public goods such as road, education and health than the market would deliver?
Every high income earner who sends their child to a state school is a beneficiary on this score.
Good grief!

david@tokyo said...

>New Zealanders pay a low to middling amount of tax by OECD standards.
They are not overtaxed.

They are compared to me - and no, I don't live in Hong Kong, I don't live in SIngapore.
On my income now I pay less than 20% of my income in income tax (i think about 15%), and the equivalent of GST is only 5%.
On the same income in New Zealand I'd already be paying 39c in the dollar for a fair portion of it. I'm 25 years old and just starting out in life - New Zealand's "rich" threshold is totally out of whack.

> There are certainly higher salaries on offer overseas, and higher salaries are worth infinitely more than lower rates of tax.

In absolute terms strictly limited to tax, that may be so (it depends on the individual), but by lowering tax you immediately create an incentive for young kiwis to start thinking about going home to live near their family and friends - regardless of whether they have a student loan or not.

> But the salaries issue essentially come down to the overseas ownership of the economy and, looking forward, the poor leadership of New Zealand's business elite, which releases an inordinately high proportion of profits in dividends rather than re-investing in higher value product.

Why would business leaders re-invest in New Zealand? Are our growth prospects after a 2 term Labour government looking up, or donw?
Businesses will invest if they see an opportunity to make money out of it. Lowering tax for a start would make any potential business ventures look that little more worthwhile doing.

Certain New Zealanders need to lose their defeatist attitude and start beleiving that New Zealand can be a better place.

spooks said...

The second part of my equation it that Labour has the objective of confusing the definition of beneficiary. Up until this current Labour term, used to be you either were on a benefit or you were on a salary. Labour's new objective is to confuse this. Got a student loan to repay - you get a benefit - even if your Uni degree has just landed you a one or two hundred grand a year job. Got kids - you get a benefit - even if you are earning up to a hundred grand. Elderly and got rates to pay - you get a benefit - even if you own a million dollar house. Labour's ultimate plan seems to be to make everyone a beneficiary of some sort. This is not good for the country and it is not a good legacy to pass on to our children.

Insolent Prick said...

This policy is an outrageous bribe, and a desperate measure from a desperate government.

Why, Michael, was this policy not signalled in the budget? Because you've realised that you've got no hope of winning the election other than by making ridiculous promises that the taxpayer cannot afford.

Feel free to comment on all of these points.

Why, if there was no money for tax relief in the budget, is there suddenly money for $300 million for student loan interest write-offs? Michael Cullen was lying then, or he's lying now.

The effect of this policy will be a massive blow-out in the number of students taking out student loans, and the size of those loans. Why? Because the Government is giving away FREE money, and students would be stupid not to make use of it.

The policy punishes all those students who work during their studies to minimise their student loans, and who work hard to repay their loans early. Now, NO students will make voluntary repayments of their loans.

Bad policy from a desperate government trying to buy its way out of trouble.

Shame on you for advocating such a totally irresponsible idea.

spooks said...

Good point IP, but isn't that typical Labour, punishing the hard workers and rewarding the passengers. Punishing the risk takers and rewarding the sloths. Punishing the employers and rewarding the non-workers. Punishing the wealth creators and rewarding the spendthrifts.

And if that wasn't bad enough, they create more of the passengers, sloths, non-workers and spendthrifts. None of which benefits our children. But then not many Labour lot have children to leave a legacy to.

Anonymous said...

David

The OECD figures on taxation take into account all forms of taxation - be it income tax, indirect tax - VAT at 17.5% in the UK, for instance, as opposed to 12.5% in NZ - social insurance contributions - National Insurance in Britain, for instance, but also ACC in New Zealand - state and other governmental tier tax, and arrive at the calculation that New Zealand is a low to middling ranked country in terms of taxation. Don't know what else can be said, really.

After six year of Labour-led Government, New Zealand's potential economic growth rate - that is the rate of economic growth that can be sustained without capacity limits being hit and inflation resulting - has risen to 3.7% from 2.4% mainly because of investment by the state in infrastructure and other capital.
Arguably the NZ state is a more reliable investor than the private sector, which is a consumer.

"Certain New Zealanders need to lose their defeatist attitude and start beleiving that New Zealand can be a better place".
Yes - that's exactly what New Zealand's business leadership - or at least the mainstream and politicised part of it - needs to do. New Zealand is consistently rated as one of the few freest economies in the world, and makes up for some natural disadvantages with excellent human capital. The leap of faith for business is to move on from the cost-cutting mentality favoured by National.

Anonymous said...

"Now, NO students will make voluntary repayments of their loans".

What's the big deal here?
The calculations as to reduced payment times will have been made with reference to the compulsory student loan repayments, regardless of the voluntary ones, and show a marked fall.

There is a historical injustice for those who have repaid with interest, but that is in the nature of these things.
There'd be no policy change at all otherwise. Roger Douglas would not have reduced taxes because it would have been unfair on those who had spent their working lives paying higher taxes before.

"Why, if there was no money for tax relief in the budget, is there suddenly money for $300 million for student loan interest write-offs? Michael Cullen was lying then, or he's lying now".

You couldn't get meaningful tax relief for $300m. John Shewen's $2bn tax relief package only gave those on $40 000 $13 a week extra.

The surplus is dedicated to capital items such as:
the Super Fund;
long-term capital outlays in health;
student loan advances; and
a currency protection fund for the Reserve Bank.
Sizeable tax cuts would see some or all of those things abolished, or a budget deficit result.

Insolent Prick said...

Now, you're showing your true colours. Because you're a drop-kick loser who never hopes of earning more than $40k a year, you are fixated with that figure, and how much you will get back in tax breaks.

But in doing so, you miss the point.

High income earners are a rare resource in this country. If you squeeze them too hard, then they will go overseas where their work efforts are rewarded. If you create a culture of envy where their efforts to grow the economy are taken for granted, then they will not stick around.

The average person with a university degree, in full time employment, earns $60k a year. They would get significant benefit, as would the economy generally, by lowering general taxation.

That same person who has saved hard to repay their student loan early, only to see the government wipe off interest for those who weren't as diligent, and face no tax cuts, would see no future in New Zealand where the Government tries to strangle the goose that lays the golden eggs.

Cheezy said...

>>you're a drop-kick loser who >>never hopes of earning more than >>$40k a year

Did anyone read any further after this guy said this? Cos I certainly didn't... Please let me know if there were any morsels of intelligence thereafter.. cos my eyes just glazed over and I thought "Oh no, another intense little boy-master of the blogosphere, trying to big himself up by trying to make others feel small".
But I hope it was good for you, insolent prick!

Anonymous said...

Apparently 460 000 people have a student loan and will benefit from Labour's policy.
I wonder how many graduates have paid off their student loan in full since the scheme started in 1992?
Rather a lot less than 460 000 I would suggest.
Are these 460 000 not "diligent"?

And how many of those "diligent' ones had a smaller student loan to start with and were able to pay it off faster because of one thing - parental wealth.
That's not even considering those who didn't need a student loan becuase of parental wealth in the first place.

Anonymous said...

New Zealand is a low to middling taxed country by OECD standards.


"High income earners are a rare resource in this country..... If you create a culture of envy where their efforts to grow the economy are taken for granted...."

I don't necessarily associate high income earners with efforts to grow the economy at all. Entrepreneurs, maybe, but most high income earners and certainly many of those with commerce and law degrees are risk-averse, not entrepreneurs.
By and large they've converted a good start in life courtesy of their family and good state education systems, without being 'capitalist heroes'.
Some of them might think they are, I suppose....

Usually they'll go overseas primarily for the experience and return to New Zealand primarily for the 'lifestyle' and the advantages for family life.
Tax doesn't have much to do with it, student loans won't anymore, and if any economic factor does, it is salary levels. But higher salaries often set them up for - a return to New Zealand.

Entrepreneurs, or future entrepreneurs, will often have low incomes. Often they're creative types who go through 'low' times...

michael wood said...

Some of the comments here are simply funny.

I particuarly like the righteous assertions that this $300m policy to fix one of the biggest political issues of the past decade is an election bribe. Of course, a vague multi-billion tax cut that will indebt the next generation couldn't possibly be called a bribe could it?

Suggesting that the policy is about "punishing the hard workers" is a good one too. Remember we're talking about people who have done the hard slog of a tertiary degree and are prepared to keep their skills and talents here in NZ. Surely these people are the "hard workers" we want to encourage. That's what this policy does.

The right is grasping at straws on this one. Debt levels increased massively under National (14% fee rises on average) and have started to ebb down under Labour. This policy will halve average repayment times allowing "hard workers" to establish families, buy homes, invest in businesses etc without the burden of debt.

spooks said...

Michael, I knew you wouldn't answer my question. I absolutely knew you would not answer.

So I will go through the motions of asking again, totally expecting the same non-response.

Last time there was a kerfuffle over student loans, Labour got lots of votes for their grand scheme for reducing the burden. It was removal of interest on loans while students were still studying. At the time, the opponents suggested that the cheap finance would result in the student debt blowing out.

Were they correct in predicting that, Michael?

spooks said...

"Punishing the hard workers"

Absolutely, it is fundamental to Labour philosophy. The harder you work the more you earn, the more you get hit for taxes. You can't deny that Michael. No matter how hard you want to spin it.

Oh sure, here you want to buy a few votes, and call it rewarding hard workers. Piffle. Who gets to pay for it? And who gets the largest reward in this new proposal? The spendthrifts get more reward that the frugal. And the the more diligent graduates have been in repaying their loans so far, the less they get rewarded. The slacker they have been, the more thay are rewarded. Like I say, typical Labour, you love to reward the slack-arses, at the expense of the most diligent.

david said...

Anon,

"Don't know what else can be said, really."

Well, for a start you can stop talking about averages.
I didn't get where I am by comparing myself to the average and aiming for thereabouts.
I got where I am by aiming to be and achieve the best.
I want to live in a country that aspires as a whole to be the best.

You can talk about your OECD averages all you like - at the end of the day I aspire to be a winner, and it's clear as day that the best deal going isn't that which the Labour party is offering. ACT is the only party even in my ball park.

Michael,

If you'll excuse my immodesty, I am a hard worker which New Zealand would do well to have. It's not because I don't want to contribute to New Zealand that I am not there now, it's because it's not mutually beneficial. And this policy does nothing at all to make me want to go home either.
That's not a 24 year old aspiring politician in New Zealand talking - it's a 25 year old kiwi who's made himself a career through his own efforts and dreams - overseas.
I am hoping that I will be able to have dreams of a life in NZ post September 17, but it's clear that Labour won't be contributing to them!

Anonymous said...

David wants a relationship of 'mutual benefit' with his own country. Oh dear.

Did those at Gallipoli think that way? I doubt it.

We're well rid in this case.

Anonymous said...

"I want to live in a country that aspires as a whole to be the best".

If you are concerned about the 'whole' you cannot avoid averages.....

Too Right said...

Chezzy - I read Insolent Prick's post in full - it made good reading. You missed something. I also read your post and between between retches, WTF's and several OMG's saw yet again that the idolatory Left cannot bring themselevs to agree that Cullen has either lied in the Budget or lied now.

Mikey - can you not see that Cullen has cynically targetted a demographic for special treatment - he is paying for the special treatment by taxing the hardworking workers you represent. Cullen is not bribing people with their own money - he is bribing them your money.

HTF can you support such venal, self-serving and nakedly corrupt practice. If you do nothing else read today's editorial in the Herald.

Cullen should be ashamed.

Anonymous said...

What is the "special treatment' here?
Those who take out a student loan have to pay it back by compulsory repayment.
Those who do not take out a student loan because they have mixed study and work or have had well-off parents are rewarded by not having to pay back a student loan as they enter working life.

Insolent Prick said...

I see, Michael, that you carefully avoided answering ANY of my points. The only possible explanation for this is that you don't have an argument, and dodge and evade, as seems to be the habit of your whole smarmy, slimy Labour Party team.

There is a major distinction between Labour's massive student loans bribe, and National's tax cuts. Spooks has already explained it, and you haven't addressed it. Because you haven't lived in the real world, Michael, you can't understand it.

Firstly, Michael Cullen said that there was no money in the budget for tax cuts. This suggested that if there were money for tax cuts, he would consider tax cuts. Clearly, he was lying. Because if there is money for student loan interest write-offs, then there is money for tax cuts. The reality is that Labour is ideologically opposed to offering tax cuts to people.

New Zealanders are overwhelmingly supportive of tax cuts as a major fiscal priority. Labour DOES NOT CARE.

The big difference between tax cuts and student loan write-offs, Michael, is actually quite simple. So read this VERY carefully. For a moment, suspend your stupid socialist ideology, and think real.

Individuals pay tax on money they earn. At the moment, they are paying far more in tax than is necessary to fund core government services--which is why we have such a huge budget surplus. Who earned that money? The taxpayers. Not the Government. Get it? It's taxpayer's money. Not GOVERNMENT money.

When the Government fritters away money that I've earned on schemes that are simply designed to deliver votes to special friends of the Labour Party, I get angry. Very angry. Those schemes are bribes. Cynical bribes, which are counter-productive. They lead to greater economic dependency, and far higher social costs. Not to mention the fact that in this case, the scheme itself is poorly thought-out, and is a knee-jerk reaction that will compound the problem of student debt, rather than resolve it.

And you expect me to feel grateful that the government is giving away MY tax money to students who will have use of free money to do as they wish?

No, Michael. Tax cuts are not a bribe. They are merely an acknowledgement that individual taxpayers have contributed to the wealth of this economy, and that they deserve to reap the rewards of their extra efforts.

And if you can't understand that, then you don't deserve to sit on a local community board, let alone in Parliament.

spooks said...

Well said, IP, but stand by for one of the brighter contributors here saying something about you having a hernia, or something equally profound. (Although this might have the effect of heading it off at the pass -- HI Ho, Silver!)

Too Right said...

Mikey, seems you and the Left blogosphere are on your own. All Editorials today are scathing at the size of the bribe on offer and the contempt with which it is delivered.

I have been wondering for a while now about the state of mind of Dr Cullen. Added to the weird tax break on offer in the budget (Wrigley's in 3 years) and the obvious bribe in your post, I think he making sure Clark does not get home. There is obviously big trouble in that camp.

Too Right said...

Mikey - you better cross check your debt calculator - suggest you start with the IRD and Retirement Commissioner's. I think you will find you have been dragged into the fraud hatched by Clark and Mallard.

That poisonous pair did not bank on someone checking the veracity of your calculator.

If this is Labour's first shot - it seems it was will be declared - OUT, hit wicket.

Anonymous said...

Yes but the newspapers want National to win.

michael wood said...

Aside from a small number of National and ACT supporters who spend most of their time in the blogosphere as opposed to the "real world" they constantly harp on about, this policy has been greeted with almost universal acclaim. Ultimately the voters will decide if it's a good policy or not.

Spooks, of course total student debt will continue to increase after this scheme comes into effect. Total debt has increased every year since the schemes inception in 1992 as more students get a loan. The most useful figure to consider is the debt per person, which went up under National, and has begun coming down under Labour's policies. This policy will hasten that decline.

Do you prefer the idea of a generation of indebted young people who can't invest in a first home or business?

spooks said...

none so blind, Michael.

spooks said...

"almost universal acclaim". Really?

Now, Michael, you are not only trying to pull the wool over our eyes, you're fooling yourself as well. Virtually all newspapers (including the leftie ones) are scathing in their editorials, and the academics are quickly letting their criticisms of the Labour proposals be known.

Already the accuracy of the Labour on-line calculator is coming under serious attack, as grossly exaggerating the savings. No doubt we will see more on this in Friday papers.

And students are quickly realising that the small amount of savings they might achieve in the very short term, would be many MANY times offset, by having to pay Labour's punitive top rate of tax for the rest of their lives, compared with the probable removal of that punative rate under an alternative government.

The pyhrric short-term savings are readily obvious to those who pause longer than two seconds to think things through -- which Labour leaders seemingly have not done. Remember these are university graduates that Labour is trying to con here, not the average layabout Labour voter.

Anonymous said...

What I see in my Friday paper is Labour up 44-37.

National musn't be listening, spooks!

Long way to go though....

Insolent Prick said...

Michael, just because Cullen and Mallard are outrageous liars does not mean that you should follow suit with outrageous lies of your own. Do not learn from them, Michael. If you want to make it as a politician, you will not get there by telling ridiculous fibs. You might survive once you've got there for a bit, but at some point people will get sick of you lying, and turf you out.

In the meantime, stick to the truth.

So I will forgive that stupid lie about Labour's student loan policy being greeted with "almost universal acclaim". But don't come up with that lie, please.

I'm assuming that you are lying on this, rather than being simply stupid. Because it's better to tell a little fib than it is to be completely ignorant, which you'd have to be to suggest that all of the independent criticism of Labour's stupid loan policy constitutes "universal acclaim".

So don't lie, Michael. And don't be stupid. It's a stupid policy, and you'd have a lot more credibility as a Labour Party candidate, and as a human being, if you just admitted how stupid it is.