Hon PETER DUNNE (Minister of Revenue) Link to this
I move, That the Student Loan Scheme Bill be now read a first time. At the appropriate time I will move that the bill be referred to the Finance and Expenditure Committee.
This bill represents one of the most fundamental reforms of the student loan scheme since its implementation in 1992. The changes contained in the bill follow two closely linked elements. The first, which forms the primary purpose of the bill, is to make it easier for borrowers to manage their loans and pay back what they owe, and to encourage earlier repayment. This will be facilitated by the second element in this bill, which allows borrowers to have all their loan details in one place and for both borrowers and the Inland Revenue Department to communicate electronically with each other. Together, these reforms will help simplify the way that the scheme’s 560,000 borrowers manage their loans and will help the Government to better manage this $10.3 billion Crown asset.
Currently, the administration of the scheme is complex, with several agencies administering different parts of the scheme. This means that borrowers must deal with different administrators regarding their loan, which can make it difficult for people to have a clear view of their overall loan position and their immediate obligations. These problems are compounded, because the Inland Revenue Department currently collects student payments on a system that was originally designed for the collection of tax. The system relies on largely paper-based communication. It is complex and inflexible. That adds to the challenges of maintaining communications with borrowers, who by their nature tend to be highly mobile as they either progress through their careers or go overseas to gain further experience.
The process of annual assessments for determining borrowers’ loan repayments also results in a complicated annual interaction with borrowers, and generates compliance and administrative costs for both parties. This bill introduces a suite of measures designed to address these problems. The first of these measures paves the way for all loan information to be provided electronically to borrowers by the Inland Revenue Department, and at the same time it will allow those borrowers to access and manage their loan account from anywhere in the world at any time. This move from paper-based systems towards a greater use of electronic technologies is the first part of wider reforms towards building a world-class tax administration, one that supports the Government’s plans for economic growth by collecting revenue as efficiently as possible. It is based on making new technologies available to allow taxpayers a greater use of modern, interactive electronic services. This will result in a lot less paperwork for the Inland Revenue Department and for taxpayers, or, in this particular case, for student loan borrowers.
Under the proposed changes in this bill, borrowers will be able to access a consolidated view of their loan balance from April 2012, when the changes will come into effect. This means that borrowers who are currently studying will no longer have to contact two agencies for this information, as they do presently. The result will be increased certainty and lower compliance costs for borrowers because of the improved quality of information made available to both borrowers and the Inland Revenue Department, and the information will be provided in a format that is easier to understand. The overwhelming majority of borrowers will also benefit from a further change in the bill that will remove the current annual end-of-year assessment if their income is from salary and wages only and their income before tax is over the pay-period repayment thresholds.
Under the provisions in the bill, the Inland Revenue Department will instead consider loan repayment deductions from a borrower’s salary or wages to be correct and final for the pay period. Minor over or under-deductions will be ignored, so there will be no surprise bills for those borrowers, and no costly assessments and square-ups for the Inland Revenue Department to administer. The borrowers will be able to get a refund if they have significantly overpaid their pay-period obligation. Only borrowers who have income from other sources that are not required to have loan deductions made from them, such as interest from investments or business income, will need to file a declaration of pre-taxed income or continue to file an end-of-year tax return and make loan repayments accordingly. To make these repayments as easy as possible, they will be aligned to provisional tax dates.
Finally, to encourage further borrowers to repay their loans, the bill introduces changes to simplify the current penalty rules that should apply when borrowers fail to make the payments that they are required to. So we are making the penalty rules for under-payments or non-payments more closely aligned with the tax penalty rules. The late payment penalty rules will be replaced with a lesser interest rate, so that penalties for non-payment or underpayment do not escalate so rapidly that borrowers perceive them as a barrier to paying off their debts. They are the main features of this bill.
In addition, the bill introduces an annual administration fee for student loans, as was announced in Budget 2010. It also contains several minor policy and technical changes to clarify certain functions for the student loan scheme more generally. These include the rules on the exemptions from the requirement to be in New Zealand to qualify for an interest-free loan, the rules for entering into instalment arrangements, and some transitional provisions to move this legislation forward from the current Student Loan Scheme Act to the new legislation following the passage of this bill.
Overall, this is a very positive bill for everyone who is involved in the student loan scheme. It has been consulted on with a wide range of groups prior to coming before the House, and I acknowledge particularly the contribution of the New Zealand Union of Students’ Associations and the other groups that have taken the opportunity to take part in the process. Therefore, I have great pleasure in commending this bill to the House.
GRANT ROBERTSON (Labour—Wellington Central) Link to this
It is a pleasure to rise to speak on the Student Loan Scheme Bill. I will say at the outset that although the Labour Party will be supporting the first reading of the bill and its referral to the Finance and Expenditure Committee, we have a couple of particular reservations about it that I will mention. We want to seek from the Minister of Revenue an assurance that as we go through the select committee process we can address what I suspect are unintended consequences or, if not unintended consequences, ones that hopefully can be mitigated as we go through the process.
As the Minister has outlined, the overriding purpose of the first part of the bill is to improve the administration of the student loan scheme by moving to an electronic format, so that it is easier for borrowers to interact and communicate with the Inland Revenue Department about their loan. I know that around the world there are borrowers and former borrowers of student loans who will be celebrating the notion that the student loan scheme can enter the 21st century and be dealt with electronically. I was recently looking at a case concerning a constituent who is having an issue with their student loan repayments. I looked at the forms they were getting from the Inland Revenue Department and I recognised them. In 1996, when I was president of the New Zealand University Students Association, I had helped to design those forms, at a time well before people were considering Internet banking. The fact that the department is still using those kinds of forms is a sign that they need to be updated, and I think we are all pleased that they will be.
No, actually, that was Wyatt Creech’s mess; I was just trying to help him at the time.
It is true that the material that students and borrowers receive is difficult to understand. Anyone who has been a student and borrowed under the scheme, or perhaps is a parent of a student who has borrowed, will know that it is very difficult to know what balance people have. It is extremely hard to know what payments have been made. Deductions are made at different times of the year. When students believe they have finally paid off their loan, many times they have not. They often have a small amount of money owing that ends up attracting an enormous amount of penalty interest that then has to be wound back, with huge amounts of paperwork in the process. Certainly, on those grounds this bill is a step forward and is something that the Labour Party welcomes as an improvement for the experience of borrowers and future borrowers.
We also support the idea of aligning the penalty payments, as the Minister has just mentioned. Anything that we can do to encourage the repayment of loans by borrowers who are overseas is good. Far too much money borrowed by people who are now living overseas is not being paid back, and obviously the incentives that we can put in place to make repayments occur are a good thing.
Where we have more significant concerns is around the idea of moving from an annual assessment to the pay-period assessment. Although I can certainly understand that this would simplify the process, it will have some negative consequences for people who are already borrowers and work, or who are currently students who work during the holidays and manage to earn more than $367 a week, as many students do during their holidays. They will then have a full and final payment made from their pay during a week period, or whatever their pay period is. This surely is not what we want. Students tend to work for long periods in the holidays to save up money so they can use that money when they are at university or polytech. If we are moving into a process whereby they will have to make repayments on the basis of their weekly pay, rather than having an annual assessment whereby they possibly would not even reach the $19,000 threshold, I do not think that is fair.
I do not think that is the kind of incentive we want to be putting on students in their holiday period. There are far too many examples of students who work very long hours during term time. Their studies suffer, they come under more pressure, and there are health consequences. If people are able to secure full-time work during the holidays, I think they should be able to keep the money that they earn, rather than losing some of it in repayments. I do not think that is the intention of the Minister in putting this bill forward. He is attempting to put forward a more simplified way of assessing people’s incomes, and making the payments as a result. I do not think it is fair on those people who will be earning $367 a week, or slightly more than that perhaps, and then not earning over $19,000 over the whole year. Under this bill, that will be considered as a full and final payment for the weekly or fortnightly pay period. I do not think that is fair, and it is an issue that we are particularly concerned about and want to address in this bill.
I note that this concern has been raised in the regulatory impact statement. In fact, the Ministry of Social Development has raised the concern that removing the end-of-year square-up and moving to the pay-period basis may increase cash flow difficulties for some. It may make the scheme more affordable for others, but it may increase pressure on the Ministry of Social Development for financial assistance. I think we need to be very careful about going down this pathway. The regulatory impact statement offers a couple of options for Ministers, and I am sure that these can be explored during the select committee process. In particular, there is the idea of whether the repayment obligations should fall on students. I think it is a very important thing, because Labour spent a lot of time when in Government on removing the interest on loans while studying, then removing interest totally. To start moving back to a position where people are still studying and having to repay some of their loans starts to wind back a system that we were trying to make more fair. I think by doing that we will go down a path that is taking us backwards, and I do not believe that is at all fair. The Labour Party opposes that particular provision as it stands.
We think there is another option, which is the possibility of ring-fencing holiday work—specifically saying in the law that holiday work would be ring-fenced, so that the particular anomaly I just mentioned could be kept out. We would like to discuss those matters with the Minister when we get to the select committee process. I acknowledge that the process of simplifying and improving the administration and moving to an electronic format is a good thing, but not if it is at the expense of some people being out of pocket. People who work during the holidays will feel that they are losing some of their income and, therefore, will have to work more during term time, or, indeed, have some form of financial hardship during term time.
On an administrative level, this scheme does some good things, but it is worth setting the context of this bill for the other changes that are happening in the student loan scheme. The Minister himself, when he introduced the bill, said it was one of the major changes that had taken place in the student loan scheme since 1992. Perhaps if one was very focused on administrative matters, one might believe that. Some of the other things that are happening to student loans at the moment are far, far more significant. The Minister for Tertiary Education, Steven Joyce, has mentioned that he is quite pleased that some of the changes to the student loan scheme will dampen demand for tertiary education. I have to say that that is one of the most outrageous things I have heard from a Minister for Tertiary Education for a long time. The Minister for Tertiary Education feels that it is his job to dampen demand. Stopping people going into tertiary education is what that actually means. The Minister’s priority is to stop people getting into tertiary education.
The first specific change to the student loan scheme that I want to mention in that regard is the notion that students must pass half of their course over a 2-year period in order to retain eligibility for a student loan. We all want students to work hard, but what the Government has done is bring in a provision that is retrospective. If one is to be eligible for a loan in 2011, one will be judged on one’s grades in 2009 and 2010—2009, a year before anyone knew that these would be the rules. That is demonstrably unfair. I have been approached by the chief executive of a tertiary institution who gave me a specific example of a student who went to university. In their first year they should not have been there; they struggled and failed everything. That student is now doing reasonably well at a polytechnic this year, but if they fail one paper, one course, they will have no loan eligibility for 2011. That is demonstrably unfair and needs to be changed by this Government.
There are also unforeseen consequences of another change, which is the 7-year limit on student loan borrowing.
Well, funnily enough, it took Steven Joyce about 7 years. That is an interesting choice of year, is it not? By putting the 7-year limit in place, that means that if someone does an undergraduate degree, perhaps in science, and goes on to do medicine, towards the end of their medical qualification they will have no eligibility for student loans.
Moana MackeyThat is right. Moana Mackey has a constituent in Gisborne whom this has happened to. That is a perverse outcome. Those sorts of changes to the student loan scheme are not positive for the future of New Zealand.
We need to be investing in tertiary education and getting people into tertiary education, rather than, as Minister Joyce has as his priority, dampening demand for tertiary education. The student loan scheme nowadays is part of making sure that people can stay in tertiary education. It is part of people’s ability to participate in New Zealand society in the future. We need to continue to invest in students to make sure that they can afford to be there, and to invest in overall tertiary education. Although this bill does some useful administrative things, it is putting in place some potentially dangerous and difficult changes for borrowers.
CRAIG FOSS (National—Tukituki) Link to this
I acknowledge particularly the first half of Grant Robertson’s speech and the positive nature with which most parties seem to be approaching the Student Loan Scheme Bill. As a member of the Finance and Expenditure Committee I am sure that that member’s colleagues will raise the issues he picked up on. I again acknowledge the positive nature and essentially the good public policy changes that are going on in this bill—at least in the administration and the implementation of student loans.
First of all, I congratulate the Minister of Revenue, the officials, and all those who were consulted leading up to this bill. In fact, as part of other briefings and discussions around tax and revenue, we learnt that some of the consultation on this bill was done using the new medium of Facebook, I believe. There was very good feedback and engagement from students and those who will be affected by this bill who are in tertiary education right now. By and large, and on the whole, the essence of their message was that we should just get on with it and do it. They do their banking and they communicate online. If they want to know further information, they want to be able to click on a link or give someone a phone call. Their lives are very busy and they want to see what they owe and when they owe it, and the terms and conditions around it. They see it as just another expense on their outgoings. I do not mean that in a facetious way; they just did not seem to see a different kind of platform.
I acknowledge the direction that this legislation has taken. It is a bit of a biggie, because, as the Minister noted, student loans are one of those things that particularly stress-tested the hardware and software in the Inland Revenue Department, simply because of the nature of managing a loan in a department whose origins were simply revenue gathering, not loans and the complication of zero percent loans plus the other changes that have gone through over the years.
The key words of this proposal are that the bill makes it easier not only to operate the student loan system but also for the final user of the student loan system, which I spoke a little bit about earlier. At the end of the day it is an overused term, but I am quite sure it is win-win all over the place. It should be a win for the taxpayer in terms of the cost of the administration of this policy, but also for those who have student loans in complying with the obligations they signed up for when they originally took on their student loans.
There are, of course, questions around some of the issues that the previous member raised about whether taxpayers should expect some kind of return on their investment in the tertiary education of someone who has a student loan, and—in these proposals—measuring that by some kind of returns or success in those studies. That is a fair discussion to have, I think. I guess the discussion will be somewhat robust at the select committee around those issues. But I am very, very comfortable as a taxpayer—and I am sure many others are—that despite the stresses and strains on our Budget at the moment, it is a fair bet. It is fair on all taxpayers—who invest money in tertiary education, particularly via student loans—that those who are enjoying that investment from the taxpayer are doing their utmost, are achieving some of their personal key performance indicators, and are achieving the ability to maintain their student loan. It is about streamlining; it is about making it easier for borrowers to keep track of their loans.
Labour’s concern about annual assessment versus the pay period is fair enough. That will be an interesting discussion to have. There will be a million and one different examples, but it is a fair discussion to have. I acknowledge, though, that there are other points in the bill where some penalties have changed: they have been clarified and simplified. So there is a little bit of balance to it, and I am sure it will form part of our discussion and part of the submissions at the select committee. At this stage I am comfortable with that, but I am more than open to engaging in that discussion—as, obviously, we will at the select committee.
There is one key point, though, when we are discussing anything about the student loan scheme and that is we simply must acknowledge the size of it. The student loan scheme is an asset on the Crown’s balance sheet; the way I always like to put it is that it is an asset on the taxpayers’ balance sheet. Every New Zealander has lent that money, at a zero percent interest rate, to students to invest in their tertiary education.
Thanks to whomever, that is what taxpayers are doing, so we have to manage that asset on the balance sheet. The size of student loans is $10.3 billion. Whether the scheme is interest-free or whatever, it is still a significant item on our balance sheet. So it is very good that it is looked after, measured, and administered as well and efficiently as possible.
As other members have noted, the bill does not involve any policy change. It is mostly about the administration and implementation of the interest-free student loan scheme, which has gone across Governments and continues under this Government.
I have just a couple of other points. The National Government is working for better value for every single dollar in tertiary education—every single dollar. We are funding more student places than ever before because we are finding efficiencies in the tertiary sector. We want a more accountable and higher-performing sector and higher participation but, with the constraints around the Budget, every single cent and every single dollar is a very precious cent and dollar. We owe it to taxpayers—and future taxpayers who have a student loan right now—to use those tax dollars as efficiently as possible. Thank you.
STUART NASH (Labour) Link to this
I stand in support of the Student Loan Scheme Bill in its first reading, but I will make two points. First, I will elaborate on why I think this bill is worth supporting to go to the select committee. Anything that makes it easier for Kiwis to pay back their student loans has my absolute support and the support of the Labour Party.
Mr DEPUTY SPEAKERThe second point I will make is that I have some concerns about the bill. As Mr Grant Robertson alluded to earlier, the bill does not take into account the circumstances of many students with regard to working during varsity holidays. Therefore, rather than eliminating complexity and uncertainty, the bill has the potential to create a level of uncertainty.
This bill transforms the administration of the student loan scheme and brings it into the 21st century. It is now the norm for many people living in New Zealand to use online payments, Internet banking, and electronic transfers. One could argue that those who have studied at tertiary education level and have taken out a student loan are technologically enabled. I do not know how people could cope in tertiary education if they were not, to tell the truth. Therefore, this fundamental shift is long overdue. Another argument is that people who have attended a tertiary education institution are probably more online than off it; we just look at Facebook, Twitter, and all these others sorts of online communication to understand the level of literacy that exists in this day and age.
One of the major reasons why I support this bill is that it promotes efficiency. It initiates the implementation of a new electronic loan management solution, which will allow student loan borrowers to manage their loans online. They can look at the state of their loan at any time, from loan draw-down to final pay-off. That is good. It is proactive and it gives students a chance to feel as if they are in control.
It may surprise the House to learn that student loan debt is currently over $10 billion, and is predicted to reach $15 billion by 2015. As Mr Foss said, that is a lot of money. Over 500,000 New Zealanders have a student loan. The average student loan debt is over $11,000. Medical students, however, graduate with a loan of about $75,000. Student loan holders who live overseas account for 15 percent, and 30 percent of all students in payment arrears live overseas. This new system will make it easier for those who live overseas to manage their student loan liability and their responsibilities. Maybe they have been out of contact or the Inland Revenue Department has found it hard to contact them. One of the reasons that I support this bill is that the department believes that the new system will increase student loan receipts by up to $22 million a year by 2014, and that is a good thing.
Most student loan processes are paper-based. Electronic tax services currently simply convert paper processes into an electronic environment. The student loan repayment system is overlaid on an electronic system that is designed for tax collection. It is therefore difficult; it is expensive to administer; it requires significant resources to address a whole lot of errors; and the risks to the current system are increasing with the growing number of borrowers. As I said, 500,000 New Zealanders have a student loan.
The implementation of a new electronic loan management solution will offer borrowers the advantages of an electronic environment and allow the Inland Revenue Department to deliver improved services to all borrowers. I doubt that anyone in the Chamber would think it is not a good idea for the department to improve services to borrowers—no one would. An electronic environment will give borrowers services that are tailored to suit their specific needs, and the ability to access relevant personal information and manage their loans with a greater level of certainty.
I will list five benefits of an electronic environment for borrowers. The first is increased certainty and reduced compliance costs. The second is a reduction in the number of contacts that have to be made and an increase in the ease with which borrowers can communicate with the department. The third is improved quality of information for both borrowers and the department. The fourth is faster processing times by the department. The final is a more prompt and accurate response to borrowers.
There is a second point to make when talking about this bill, and it is a fundamental problem. It was outlined by my colleague Mr Grant Robertson. The bill replaces the annual assessment, which sits at about $19,000, for the vast majority of borrowers whose income is largely from salary and wages only, with a pay period assessment. Quite simply, if students earn over $367 a week they will automatically start paying back their student loan. The problem is that for students who are in the middle of their tertiary course and earn money during the holidays to pay for their rent, food, etc., let alone their tuition fees for the following year, it is totally counter-productive. The reason that students work is to earn money so that they do not have to borrow so much. Yet this bill, as it is drafted at the moment, proposes to take money from students before they have finished their courses, therefore forcing them to borrow more. It is a sort of insidious money-go-round. I can only conclude that this is one of those unintended consequences that sneak into bills, only to be ferreted out by diligent Opposition MPs, who obviously have a slightly better understanding of economics than those in the Government. As it stands, the logic behind this section of the bill is flawed and will have to be tidied up by the Finance and Expenditure Committee. I think we heard the chair of that committee, Mr Foss, acknowledge that we will tidy up this issue during the select committee process.
During my years as a student I had many jobs; I always had a job during the university holidays. I was either pruning pine trees, working in wool stores, working in freezing works, or labouring on building sites both here and in Australia. They were great times in hindsight, I say to members. But it was hard enough paying off end-of-year overdrafts let alone having to make student loan repayments. So I hope that the Minister sees the sort of dilemma that we are putting forward and that it will be addressed.
The legislation contains some square-up provisions, but instead of making it easier for students, in fact it makes it more difficult and adds another level of complexity to the whole situation. It is a level of complexity that is not needed. It can be avoided, and provisions should be in place to ensure that it is. I understand that the repayment method is being simplified to avoid end-of-year square-ups for most borrowers, and late repayment penalties are also being simplified and eased. I like that, because all of these changes will, hopefully, make it a lot easier for the student loan system to work more efficiently and make it easier for borrowers to repay debt, particularly overseas borrowers, who have significantly lower repayment rates. Having sat on the Finance and Expenditure Committee for nearly 2 years now, I know and understand the problem that the Inland Revenue Department has making contact with young New Zealanders who are overseas—usually in the UK, earning money by working in pubs—and who are quite transient a lot of the time. This bill moves the responsibility back on to the students. The bottom line is that when they have taken out a loan they have a responsibility to pay back that loan. However, if we can fix up this one issue that I have just outlined I am sure that Labour will support this bill all the way through the House.
In conclusion, I have talked about the importance of communicating information—important information—to a group of technologically enabled taxpayers, and about the importance of an enabling system that allows people to better manage their student loans in a timely and affordable manner. That is most important. I have also talked about the importance of rectifying the situation outlined in the bill that penalises students who work in the holidays to earn money to pay for their further education. I am sure that, as mentioned, this was an unintended consequence. It is easily rectified. We will do that in the Finance and Expenditure Committee. It was picked up by Labour because we understand economics, we understand business, and we understand the sorts of dilemmas that a lot of these students face. It will be sorted out. That aside, I am broadly supportive of the bill and I am certainly supportive of the principles it addresses, so I commend it to the House. Thank you.
CATHERINE DELAHUNTY (Green) Link to this
Tēnā koe, Mr Assistant Speaker Roy. He mihi nui ki a koutou katoa. I rise to take a call on the Student Loan Scheme Bill. The Green Party will vote to send it to the Finance and Expenditure Committee for further investigation. As with all tax legislation, the devil is in the detail and we look forward to the submissions. Although we support the bill on its first reading, our continuing support is not guaranteed.
The national student loan debt is over $11 billion. The loan scheme is a major disaster and a giant experiment gone wrong. This particular technical tax bill, although introducing some common sense and some uncontroversial ideas, as well as some ideas that are more controversial, fails to tackle the elephant in the room—the scheme itself. This bill fails to address the debt problem, and continues to value and measure the loan burden as a national asset. While we fiddle, Rome, for the indebted generation, is still burning.
Perhaps I should stop at this point and congratulate Sir Roger Douglas and the men of his time who introduced the student loan legislation. We have created a generation of people who are economically disempowered by this model, and who no longer believe that their Government, their country, and their elders think that education is something worth investing in. It is all up to them as individuals. They are on their own. The consequences of the ideology that we are all on our own can be seen right across the board in our communities today, and it is not a pretty sight.
The student loan scheme was introduced in 1992 under a previous National Government and it was a giant mistake. The current total debt is $11,236,962,000 and is growing by the second. Total debt is growing by a billion dollars a year. Surely that is not sustainable at the national macroeconomic level, especially not for the individual students and families affected. Gareth Hughes MP is one of the more than 560,000 New Zealanders who have a student loan. I am lucky; I do not have one. I am too old. I got a free education, so I feel very reluctant to punish those who did not. However, my daughter has a debt, and so do the children of many other parents here. Gareth’s debt is on a similar scale to the 2008 average individual debt, which was $28,000.
I come back to the bill itself. The Student Loan Scheme Bill sets out changes to the way that student loans are handled by the Inland Revenue Department, replacing the current Student Loan Scheme Act 1992. The bill seeks to make the system electronic-based and under the realm of one provider, the Inland Revenue Department. It tightens up penalties for non-payment, which some of us are very dubious about, and replaces the annual assessment for the vast majority of borrowers, whose income is largely from salary or wages only, with a pay period assessment.
There are some complex, counter-productive implications in this proposal, which have been touched on by some of the Labour speakers. We hope the select committee will take those seriously and address them. But let us start with the good things in the bill. It does not fundamentally alter the interest-free loan status introduced in 2006 by the previous Labour Government. That was probably the biggest change to the scheme since its introduction, yet it still did not alter the unfair experiment that is crippling this generation and future generations with debt. No matter how much lipstick one puts on it, it is still a pig in a sow crate. The bill aims to make the student loan scheme simpler, and this will benefit students as well as graduates. It cuts down on the administration of loans. At the moment two bodies share the information—the Inland Revenue Department and StudyLink—and they, and we who are trying to find out about the level of debt in our families, have to go back and forth between those bodies. So focusing it in the Inland Revenue Department is a step forward.
Gareth, in his previous speeches on this, talked about not knowing how much he owes. It is a bizarre situation, when we are all supposed to be so economically savvy, that we cannot know how much we owe. That is because he cannot not go online and check it out. It is a big step forward if he can do that. It is amazing that it has taken till 2010 to see an electronic version and be able to access the amount of the loan.
This in particular makes it easier for overseas borrowers to access information. There are hundreds if not thousands of student loan refugees overseas, each with their own tale of how the student loan bill got out of control. I will quote an article from the New Zealand Herald of 4 September 2010 about somebody known as Trev. “Trev is not this Kiwi loan refugee’s real name but that’s what we’ll call him because he wouldn’t be too happy to be outed and get a knock on his Queensland door from a debt collector, thanks to a small loan he took out as a 19-year-old, largely to buy a stereo. That loan has spun out of control and looks set to plague the New Zealander”—now living in Queensland—“for the rest of his life. Five years ago the original $7000 had risen to $157,000 and was accelerating so fast Trev fears the total is likely to be approaching $250,000 by now.” I mean, talk about an unintended consequence. Trev “can’t face looking anymore and as he hasn’t a hope of affording the huge monthly repayments, he has decided to put his head in the sand.” That is the legacy of a system for overseas borrowers based on interest. It means that many New Zealanders are now permanently alienated from their home country. If members think that is a good thing, they might like to reflect on the consequences for future generations of this kind of debt-based punitive system.
The bill sees the student loan as a Government asset, not a Government burden, and it introduces an admin fee. The Minister knows he cannot mess about with the popular interest-free loans policy, so he is trying to get round it by charging interest by stealth. The Minister has floated the idea of an annual $50 charge to all former students with an outstanding loan balance. This would affect 500,000 New Zealanders and net the Government about $15 million per year. It seems unnecessarily punitive to hit all these people with an extra annual fee that they cannot avoid. However, why are we surprised? This whole system was always about a punitive view of getting education. Believe it or not, there are countries in the world that invest in their young people, that value education, and that do not see it as something they should punish young people for by creating a permanent debt for them. But we are not in the modern world when it comes to this; we are still in punitive mode.
However, the Greens do think this bill will make the administration of a loan cheaper. That is where the saving should come: better administration and more electronic process, not more fees and burdens on students. Otherwise it is just a continuation of this Government’s cold-blooded approach to the student debt issue and failure to recognise that student loans are an investment in education and the future of our economy. One area we seek to investigate in detail is the process for people earning under the $19,000 compulsory repayment exemption level. The process appears difficult, and puts the onus on the student or graduate, firstly, to know about it; secondly, to approach their boss about it; and, thirdly, to obtain a certificate for exemption. I think many younger people have thrown up their hands at the bureaucracy and complexity of the existing situation, and they will not embrace or understand any more changes. There is the possibility that it may be easier for graduates to get caught out with repayments.
One very worrying clause allows for “Further means of recovering amounts that remain unpaid.” We are guessing that means, reading between the lines, debt collection. As the New Zealand Herald editorial pointed out, we need a fair approach to student loans, and calling in one’s burly debt collector mates will just see more spent on debt collection than is collected. We do not use debt collectors for those who skip overseas and skimp on child support, do we?
The portfolio is currently projected to grow to $14.5 billion by 2014, driven by growth in the number of new borrowers. Thus we are saddling an entire generation with crippling debt that could impact on all areas of their lives and will only get worse unless we act now. We need real solutions to student debt and the sector in general.
As Gareth has made the Minister for Tertiary Education aware, we are seeing a cut in the tertiary education spend, which is seeing institutions shut their doors to prospective students. The Minister has also introduced a lifetime limit for access to student loans. This Minister is limiting those who want to do a double degree, change midway through their studies, study a long course like medicine, or take a while—like the Minister himself—to get their zoology degree. That means the system is very inflexible and very rigid, and we need to give it a D.
So, in summary, the Greens will be voting to investigate, and possibly amend, this bill at the select committee on the basis of the issues that I have raised. Our support is not guaranteed. I have to say that I agree with Grant Robertson that the quote of “dampening demand”—a comment made by the Minister for Tertiary Education—is an appalling comment from that Minister. If he wants to talk the language of the market obsessively—like so many people do in this House, as if there was no other reality— he should at least understand that education is an investment. The Green Party is very concerned, and at every opportunity with every student loan bill we will lay this concern on the table, while also supporting the positive things that are in the tidy-up legislation as far as it goes. So we are watching this space. Thank you.
TE URUROA FLAVELL (Māori Party—Waiariki) Link to this
Kia ora tātou. Kia ora tātou e te Whare. I say from the very outset that we have advised the Minister for Tertiary Education that the Māori Party will not be supporting the Student Loan Scheme Bill at its first reading. The reasons are fairly straightforward, and I will try to elaborate on them this afternoon. Philosophically, what we put out in our election manifesto at the last election is the key thrust behind our position in opposing this bill. As others have said, the purpose of the bill appears to be pretty straightforward: it will reform the way student loans are paid, reform the way borrowers can manage their loans, reform the way loans are to be administered, and rewrite the current student loan legislation. But what does all that mean in terms of dollars and cents? For us it will increase the loan establishment fee from $50 to $60, and it will establish an annual $40 Inland Revenue Department administration fee. I put it to the House that for some of us, that may not be too much. Fifty dollars is maybe not a lot; it may be neither here nor there—I suppose it could be a bottle of pinot noir, perhaps a meal at Bellamy’s, or whatever. But for students, in a sense, it is a little bit more than that. In fact, it could be crucial to whether they stay in the game. We are talking about maybe a down payment on course textbooks, or a weekly bus pass. I suppose that, in the end, it is all a matter of scale.
A student loan covers course fees and/or living expenses for full-time students. The central policy challenge for the Māori Party is that although we recognise and celebrate the fact that the loan scheme has clearly opened the door to tangata whenua entering tertiary education, the related issue is that they end up with disproportionately high levels of debt. We understand that more Māori have a student loan debt than any other group, although the level of debt held is similar to other groups. Māori do, however, have the lowest post-study incomes, and repay their loans more slowly than other groups. So although we accept the need to review the administration and repayment regime, we are most concerned about the impact of these new, increased fees and loans on students who are already struggling with things like rising food, rent, and petrol costs.
Notwithstanding the reduced compliance costs achieved by the introduction of the electronic management system, the introduction of the Inland Revenue Department’s annual administration fee will increase the cost of a Māori student loan by $200-plus or so over a 5-year period. We consider that both the annual Inland Revenue Department administration fee and the loan establishment fee will have a negative impact on Māori students who have student loans. Like others, we are absolutely committed towards a key goal of increasing accessibility to tertiary education as a front-end investment in the nation’s future. To this end we believe that tertiary education should be freely available to all.
I shall draw on a case study from Ngā Kete Wānanga Marae at the Manukau Institute of Technology. The Manukau Institute of Technology serves a population base characteristically of people of low socio-economic status and high unemployment. It has a high percentage of Māori and Pasifika peoples. It has reported that the immediate pressures of Māori and Pasifika students are financial difficulties, and survival within a tertiary institution. They describe the fact that a high number of Māori and Pasifika students rely on a student loan to finance study. Retention of these students is largely dependent on their financial ability to remain studying while family pressures mount. Māori and Pasifika students also tell them that they find it increasingly difficult to remain in study without additional academic, cultural, and personal support. So at their institution, Te Tari Mātauranga Māori—the Māori education department at the Manukau Institute of Technology—takes an active role in providing some degree of academic and cultural support within the programmes it offers. Central to this support is the institution-based marae that sits near Te Tari Mātauranga Māori on campus. I recall that one of my kinsmen, Toby Hapimana Rikihana, was appointed as the first matua kaiwhakahaere back in 1990, so it is great to know that it is still going strong in 2010.
I tell this story because it reflects where we want to demonstrate our support as a party in terms of helping to ensure that all people have the chance to pursue tertiary education. In line with this policy direction we have always thought that a brave and visionary Government would introduce a fee reduction policy to reduce fees to a nominal level over time. Ideally we would also want to increase access to student allowances by reintroducing a universal student allowance that would be set at the level of the unemployment benefit. This is, of course, if we assume that increasing tertiary participation is something worthwhile and of general value to the nation.
The Māori Party believes that participation in tertiary education is something we should be actively encouraging all of our young people to consider, or our not-so-young. We were very pleased to hear the comment from Dr Roy Sharp, the Chief Executive of the Tertiary Education Commission, that they would assume that as the Māori population is, on average, younger, higher Māori participation levels in tertiary education would be desirable. The commission has published performance indicators for the sector, showing 9 percent of university students and 20 percent of those at polytechnics are Māori. In the wānanga sector, the population at Te Wānanga o Raukawa and Te Whare Wānanga o Awanuiārangi is more than 90 percent Māori, but only 51 percent of Te Wānanga o Aotearoa’s 36,000 students are Māori.
Our policy focus around student loan repayments has been one of our key platforms. Therefore, in helping to achieve higher Māori participation levels in tertiary education our approach is that debt repayment should start only when one starts earning one and a half times the average wage. In this same policy we advocate for a 5-year grace period for repayments after graduation. We are also committed to the concept that student loans will remain interest-free. This, then, as members will appreciate, is the policy context in which we have responded to the Government’s intention to repeal the current student loan scheme legislation. There is a massive contrast between our expectations and the reality outlined in this bill. Therefore, we are unable to support this bill at its first reading.
DAVID BENNETT (National—Hamilton East) Link to this
The Student Loan Scheme Bill is part of a reform of the tax system, and it is also to make the student loan scheme more effective, easier for students to use, and easier to enforce.
Is that Chris Hipkins, the youngest member of the Labour Party and one of the 17? He is one of the three who were in the room. He was there and he knows that he has no future under Phil Goff. He wanted a different future. Look at him. He will not deny it in this House. He will not stand up and deny it. No, he will not do that. He is one of the 17 and he knows it. Tonight we should be focusing on what is a real piece of legislation before us, not talking about how the Labour Party will roll its leader in the next couple of months.
Now we have Ross Robertson, who has moved to the front bench. That is the only way he will get on the front bench—if he rolls Phil Goff. He knows it. Ross knows a lot of things about the Labour Party that he will not tell us. They will come out in the next couple of weeks, I am sure; it is just a matter of time.
I will talk about the bill, and not the Labour Party and its mess at the moment. This bill is important because it reflects a more modern form of communication of information through the Internet. The format of the proposed scheme is one that students will find a lot easier to use. The bill also deals with some areas around the taxation consequences and how it will be done for wage and salary earners compared with how it will be done for those with passive income sources as such, and whether the previous process of a square-up is needed in both situations now or just in the case of passive or other sources of income. In essence, this bill is important in preparing the student loan scheme for a more modern format. The student loan scheme was brought in by a previous Government. The legacy of that scheme is that we have not been able to offer as many people education in the tertiary sector as we would have liked, with the cap on student numbers that the previous Government brought in.
Well, it is. You brought in a cap on the number of students when you brought in interest-free student loans.
H V Ross Robertson Link to this
I raise a point of order, Mr Speaker. I let it go the first time, but the member has now said “you” twice, bringing you into the debate. I am sure that is not what he intended. He should have referred to the member by her title or her position.
The ASSISTANT SPEAKER (Eric Roy) Link to this
I will uphold the point of order. The member should be a bit more careful.
Thank you, Mr Assistant Speaker. That was Ross Robertson, soon to be Labour’s shadow Minister of Foreign Affairs, once he gets rid of Phil.
When we look at this bill, we see it reflects the more modern technology of the Internet, so that students can get greater access to what their loan liability will be and can have real-time transfers of information about their loans. It also enables the Inland Revenue Department to have more access around borrowers and their repayments. We see that the Inland Revenue Department is looking at forms of communication other than just written forms, which are quite expensive and very difficult for it to control over time. This is part of a wider movement within the Inland Revenue Department to more electronic forms of communication with taxpayers. I guess it is easy to start with the student population, which is very in tune with modern technology. They go into occupations where they can access and use technology to a large extent. This bill is important not only for modernising our tax system but also for enhancing the student loan scheme so that it is more effective and easier to operate. We look forward to the bill passing through this House.
CARMEL SEPULONI (Labour) Link to this
Before I start on the Student Loan Scheme Bill I say to the previous speaker, Mr Bennett, that I think he should thank the member Mr Bakshi for looking at him adoringly the whole way through his speech, because he was the only person to whom Mr Bennett delivered his speech. He was facing him the entire time. It is fantastic to see such strong relationships within the National caucus. I think Mr Bennett should thank Mr Bakshi.
There is a lot that I have to say about this particular bill, but I would rather talk about the wider context in terms of the tertiary environment at the moment. However, before I get on to that, I will touch on some of the aspects specific to this bill—
—which is what Mr Bennett did not do.
Labour supports this bill, as it makes some positive changes that will make it easier for borrowers to manage their loans and pay back what they owe. However, we hold serious reservations about some aspects of it, particularly its impact on working students. We believe there are changes that need to be made at the select committee to make sure this bill is fair.
Overall, Treasury expects that the changes will increase student loan receipts by up to $22 million a year by 2014. We think that is a positive step forward for borrowers and for the Crown. Anything that assists people with paying back their student loans and making it easier for them is welcomed by this side of the House. I myself at the beginning of this year, after 14 years since commencing study, although I finished studying much earlier than that, paid off my student loan. It took me 14 years to pay off my student loan. I know there are a few other members in the House who were in the same situation.
To this end, Labour particularly supports the changes to late-payment penalties, from a total of 19.56 percent interest a year to just 10.6 percent, or 8.6 percent if the student enters into instalment arrangements. We are opposed, along with the Māori Party, to the increase in the student loan establishment fee from $50 to $60. We believe that this is part of an effort by the National Government to reintroduce interest by stealth on to student loans. A second area of concern we would like to highlight is the way changes to the repayment system will impact on student incomes. Under the proposed changes, students would have to begin making repayments weekly, fortnightly, or monthly, depending on when they get paid. The proposal would require them to make repayments once they have earned over $367 a week. Under the current system, students have to make repayments only once they earn over $19,084 a year. I know my colleague Mr Grant Robertson talked a bit about that before. The problem with this is that many students would earn more than that each week during the holidays, but less than $19,084 over a year. This means that some of the money they were saving for the student term, through their holiday jobs, would have to be used to repay their loans instead, and it would probably force them to increase their loans. That is an issue we have with this bill.
Given we are talking about student loans, I think it is important to talk about, as I said earlier, what is happening in the wider tertiary sector at the moment. We on this side of the House have major concerns in that respect. Recently, I have been out and about, talking to our Pacific people who are teachers, academics, and parents. They have concerns about what is happening right across the education sector—from early childhood education through to the compulsory sector and on to the tertiary sector, which I plan to talk about now.
Under the Labour Government, tertiary education became more affordable and accessible for New Zealanders. Labour introduced the policy of paying no interest while studying, so that students were not charged interest on their student loans while they were studying. This was followed in 2006 by the introduction of universal, interest-free loans for all borrowers living in New Zealand. I will go back to something that Mr Dunne said earlier. He was trying to say that the legislation we are discussing today in the House is the most fundamental change to the Student Loan Scheme Act since its introduction in 1992, but I think that that might be going a bit far, I tell Mr Dunne. I think, as a former student and as a person who had a student loan, the most fundamental change was undeniably when Labour introduced interest-free loans, not the useful administrative changes that are being made by this particular bill that Mr Dunne is pushing through.
The interest-free student loans that I talked about as being so fundamental and so important to people like me who had student loans to pay back, were introduced in 2006. In 2005 the Labour Government had made changes to the parental income threshold for student allowances, raising it by 20 percent, followed by further 10 percent increases in 2007 and 2008. Those are the things that really matter to students, and to people who are forced to take out student loans because they do not have parents with the means to pay their fees, or they do not have the means themselves. I tell Mr Dunne that the administrative changes that we see in this bill—useful though they are—are hardly the most fundamental thing ever to have been done with student loans.
What we have seen over the last 2 years from the National Government is a series of changes, a series of cuts, across the board to our education system in each and every one of the sectors, including a $349 million cut over the next 4 years from student loan funding. This cut will be made through restricting access to student loans, requiring students to pass more than 50 percent of their full-time courses over 2 years in order to keep borrowing from the student loan scheme, introducing a lifetime limit on access to student loans—7 years for an undergraduate degree—and preventing permanent residents and Australians from accessing a student loan until they have lived in New Zealand for at least 2 years.
On paper, some people might look at that and think it sounds fair, but we know its implications and know that it is, in fact, not fair. It means that those restrictions will result in 17,000 students losing access to student loans, and for our Pacific community the implications are even more prevalent, with a disproportionate number—2,500 of those 17,000 students—being Pasifika. That equates to 10 percent of all Pacific students currently receiving a student loan. The introduction of student loan restrictions is a huge setback to the Government’s tertiary education strategy for 2010 to 2015, and its goal of increasing the number of Pacific students achieving at higher levels. Recently we have heard concerns raised by several different ministries, including the Ministry of Pacific Island Affairs, which has stated that the package may result in Pasifika students dropping out of university and going on to the unemployment benefit or shifting to cheaper avenues of study. Both of those things hardly seem aspirational—to use the word the National Government seems to like to use—yet that side of the House would continue to go down that track and put these types of changes into place.
We are concerned, because under the previous Labour Government the number of Pasifika children in early childhood education increased, the percentage of Pacific young people achieving National Certificate of Educational Achievement level 2 increased, the number of Pacific school-leavers taking part in Modern Apprenticeships schemes increased, and the number of Pacific students in tertiary studies grew faster than for any other ethnic group. Yet all of that at the moment is at risk because of decisions being made in the tertiary education sector by the National Government. Decisions are being made that show that that side of the House has a lack of aspiration for Pacific people in education, is neglectful of Pacific communities at all stages of education, and undervalues both Pacific people’s culture and heritage and the importance of the contribution that the Pacific community currently makes, has made, and will need to make in the future.
We heard from Mr Foss that the changes the National Government is making are supposed to be fairer on the taxpayer. Well, let us keep in mind that it is the young people who are taking up student loans and are engaged, or intending to be engaged, in tertiary study who will be the taxpayers of the future, and who will have to pay back the debt that the Government on that side of the House has incurred for our country.
Hon Steve ChadwickThose members will not be there, because they will be sitting pretty in their retirement villages, over in Hawaii or wherever, and leaving that debt to be paid back by the young New Zealanders for whom they are trying to restrict access to student loans.
I will end it there. As I said, we support this bill we are discussing in the House today, but I think it is important that we look at the wider context in terms of the damage that the National Government is doing to our tertiary sector. Thank you.
AARON GILMORE (National) Link to this
Let me just state the fact that National is completely committed to interest-free student loans. I want, as I normally do, to share a story, the story of my student loan, which will give one of the reasons why an important aspect of this Student Loan Scheme Bill will help students.
Most members across the House have had a student loan and have tried to repay it, but for a period of time have never really known the balance. When we have tried to pay it back, balances have been sent to us monthly, saying whether we were in or out of credit, whatever the case might be. In my case, I spent 3 months trying to repay a dollar, but every month I would be out by 3c or 4c. It took 6 months to finally get a balance that said I was 2c in credit. This bill will fix that; this bill will bring about a situation whereby students will be able to go online and work out what their balances are at any one point in time. I think that is a good step in the right direction.
There are some really interesting things in this bill that I think Opposition members seem to be scaremongering on, which has seemed to be their way recently. I will talk particularly about the area they have talked about—that of a full-time student working throughout the holidays, and the issue that that person, earning $300-odd a week, might have his or her pay deducted for their student loan. Clauses 48 to 54 of the bill state that such students can get an exemption. If they believe that their holiday earnings throughout the year will total under $19,000, they can apply for an exemption so that deductions would not apply, which completely ruins the argument put forward by Labour.
One of the interesting aspects of this bill—and I am a big fan of information disclosure—is that it exempts students from the Credit Contracts and Consumer Finance Act, which is quite an important aspect and requirement of this bill for it to work. The Credit Contracts and Consumer Finance Act requires a whole lot of consents for electronic communication and other niceties. They are there for good reasons, but this bill makes student loans exempt from those consents to make information disclosure online, which people expect these days, to work. I think that is a sensible thing. Some people might believe that it is taking away a few people’s rights but it is actually a good step to give that information to students, who in this modern day and age expect not to rely on bits of paper flying back and forth month by month, but, instead, to know their balance online day by day. That will allow those students to have a better understanding of what they owe, to pay it back and get out of debt a little bit faster, then get back to saving more money for the productive part of society.
That is what we want to see. We want to get that loan balance to come down a bit, both personally and as a group. That is what we want. We want a more accountable, higher performing tertiary sector, and a lower loan balance in order for these people to get back into the workforce and pay off their loans as soon as possible, and that has to be a good thing. Thanks very much.
CHRIS HIPKINS (Labour—Rimutaka) Link to this
It is a pleasure to follow on from Aaron Gilmore in this particular debate on the Student Loan Scheme Bill. I noticed he said that when he tried to repay $1 of his loan, he was always 3c or 4c short. Well, we in the Labour Party have been saying that Mr Gilmore is short of sense for quite some time—
I raise a point of order, Mr Speaker. I found that mildly offensive and I think the member should apologise.
The ASSISTANT SPEAKER (Eric Roy) Link to this
I think the member got pretty close to breaching some conventions of this House. I ask him to debate the bill.
I am very happy to do that. I am very proud to rise as a Labour speaker on a student loan bill, because I think Labour’s track record, when it comes to keeping our promises regarding student loans, stands in pretty stark contrast to the promises made by National.
Let us go back and have a little bit of a history lesson. Back in 1992, how did we end up with the student loan scheme in the first place? We ended up with the student loan scheme because National broke its promise. Lockwood Smith went up and down the country signing pledges saying that if he did not do away with student fees altogether, he would resign as Minister of Education. In fact, he did not do away with student fees, at all; the fees went up. He increased them, he introduced the student loan scheme as the way that students would be able to pay the fees, and he cut eligibility for allowances by introducing parental means-testing. That was how we ended up with the student loan scheme in the first place—because National broke its promise.
What did National do at the last election? It promised that it was going to keep the interest-free student loan scheme. That was after John Key had said it was a hoax, it was a bribe, it was recklessly irresponsible, and he was going to fight it with every bone in his body—that was what he said.
Iain Lees-GallowayWell, one would not find many there. But then Mr Key decided that he was going to keep the interest-free student loan scheme because it was very popular. National promised to keep it.
What is National doing with this bill? National is increasing the annual fee that a borrower has to pay from $50 to $60. The annual fee was never in existence until National came into Government. It was never there. It is a new tax, introduced by National, on student loan borrowers. Of course, it is a form of interest, because it is an annual fee, but it is a very regressive form of interest. Students pay the same fee regardless of what their loan balance is. So the people who have quite small loan balances are more disadvantaged by having to pay what will now be an annual $60 fee. It is a broken promise. National said it was not going to change the interest-free student loan scheme. It has broken that by introducing this annual—I do not know what National is calling it—administration fee, or whatever. As my colleague Damien O’Connor said, it is a new tax introduced by the tax-cutting National Government. We could add up several new taxes that National has introduced, and this is yet another one.
As I have established here, Labour has a pretty proud track record of keeping our promises when it comes to student loans. We promised interest-free student loans and that is exactly what we delivered. We delivered interest-free student loans in 2005. Prior to that, we promised to remove interest on student loans while a student was still studying, and we kept that promise. We are very proud of our track record, and we think it is in pretty stark contrast to National’s track record when it comes to student loans.
I will talk about some of the facts of the student loan scheme. I think it is important that we know what we are talking about here. As of 30 June 2009 student loan debt totalled $10 billion. When I was at university and involved in student politics, back in 2000 and 2001, we were running campaigns to raise public awareness about the $3 billion of student loan debt. It is now up to $10 billion and it is continuing to grow. One of the things that was really interesting during that period of time is that we got the Ministry of Education to release its projections showing at what point the student loan scheme would break even—would collect back the equivalent of what it was paying out. I think the ministry said that it will be about 2025 before the overall debt stops growing. When Labour introduced interest-free student loans that date came back quite a long way, and the scheme was going to reach the break-even point at a much earlier point in time. I would be interested to see, and I hope the Minister for Tertiary Education will provide them to the select committee, some revised projections based on the settings provided in this bill and on the other changes that the National Government has made, in order to find out the exact point that the student loan scheme will stop ballooning out, becoming a larger and larger item on the Government’s balance sheet. I hope the Minster will provide that information to the select committee when it is scrutinising this bill.
We are talking about a significant number of New Zealanders. Back in June last year over half a million people had a student loan balance with the Inland Revenue Department. I am assuming that there will be more on top of that, because for the first year a student’s loan balance is administered by Work and Income; it is not transferred to the Inland Revenue Department until the following year. So each year the new borrowers do not move over to the Inland Revenue Department for a period of time. Potentially we are talking about, at an estimate, at least 600,000 New Zealanders who would have a student loan. There were 57,000 new student loan borrowers in the last year, which would suggest that we are looking at about 600,000 people with a student loan balance.
The average amount borrowed by each student each year is about $6,900. For a lot of students, that will simply be their tuition fees, and that is the way they manage their studies. They work, or they receive an allowance to pay their cost of living, or they stay at home with their parents, but they use their student loans to cover their tuition fees. Of course, for students who have to borrow to live, the average loan balance would be significantly higher. The average student loan debt held by the Inland Revenue Department is about $11,000.
I will talk about the number of student loan borrowers who are overseas, because I think that is particularly important. Fifteen percent of student debt holders are based overseas. These are the people whom John Key said he would bring back. In the bright future that he promised New Zealand, everyone was going to come flooding back to this country if we had a National Government. I am not sure what happened along the way, but we have not seen this huge tide of people queuing up at the airport at Heathrow to come back to New Zealand now that John Key is the Prime Minister. Fifteen percent of our student debt holders are still based overseas.
But one thing this bill does—and this is one of the reasons why Labour supports it—is to make life a lot easier for those people who are overseas to get up-to-date information about their student loan balance. Going online is the way that we have to go. I am one of the online banking generation. I do all of my banking online. I do not get paper statements from my bank any more. I would like to think New Zealanders can get their student loan balances electronically and can do away with paper-based statements. Potentially there is a saving there for the Inland Revenue Department. Actually, I suspect there is quite a big saving there for the department, because although I was fortunate enough to pay off my student loan 2 years ago, every year the department, in its good, charitable way, sends me a new student loan balance sheet that says I have a zero loan balance. Normally, it sends me two or three, and they are normally sent a few days apart. So I get duplicate student loan balances every year, telling me that I have a student loan account that has a zero loan balance. If we move to an electronic system, I think the department could save a bit of money on postage and printing at the very least.
Yeah, that is right—the Inland Revenue Department could spam me instead of wasting money on postage. I think that would be a very welcome addition to the student loan scheme and it is something we would support.
However, I do raise a concern, having now read a bit more detail about what this bill will do, about the repayment provisions that it introduces. Moving from a yearly threshold for repayments to a pay-period threshold for repayments means that students who are still borrowing, and who work hard over their summer holidays to earn enough money to live off so that they can borrow less, will be disadvantaged, because they will have to make repayments on their student loan during their holiday employment. If we were to let them keep that money for a little bit longer, they would be able to reduce the amount that they borrow in the first place. Therefore, at the end of their study, they could potentially pay off that amount a little bit faster. I think we should stick to the threshold of $19,000 a year or so, and only when students go over that yearly threshold should they have to start making mandatory student loan repayments. Calculating it on $367 a week will capture all those students who do seasonal work. It may be fruit picking. I do not know what seasonal work students do down in Invercargill, Mr Assistant Speaker Roy, but I am sure that they do some down there—
There is heaps of seasonal work in Invercargill, which they would be doing to help pay for their tertiary study. Of course, if they are at the Southern Institute of Technology they would not be paying fees at all, because it has zero fees. Either way, I think it is important that we encourage students to do holiday employment, and we should make it easy for them. Therefore, I do not think they should have to make student loan repayments while they are doing it.
Labour is supporting this bill’s referral to the select committee and we are looking forward to the debate.
A party vote was called for on the question,
That the Student Loan Scheme Bill be now read a first time.
Ayes 115
- New Zealand National 58
- New Zealand Labour 42
- Green Party 8
- ACT New Zealand 5
- Progressive 1
- United Future 1
Noes 5
Bill read a first time.