CHRIS HIPKINS (Labour—Rimutaka) Link to this
I will be very brief on this. One would have to be completely crazy to take up the student loan repayment bonus. Therefore I think it is important that before people take up the repayment bonus, they receive adequate advice, so that they can ensure that they are making a prudent decision. There are very, very few circumstances in which it would be in somebody’s best interests to take it up. My colleague Trevor Mallard has put forward an amendment to that effect, which would ensure that somebody receives appropriate advice and guidance before taking up the repayment bonus. I commend his amendment to the House.
COLIN KING (National—Kaikōura) Link to this
It is indeed a pleasure to speak to the Student Loan Scheme (Repayment Bonus) Amendment Bill during its second reading. I would like briefly to cover off the intention of the bill, the reasons why someone would take advantage of its provisions, and some of the work that was given significant consideration by the Education and Science Committee.
I will start off by saying that this bill is consistent with the National Party’s goals of creating incentives for people to get ahead. It is consistent with the National Party’s vision of aspiration and making the most of one’s opportunity. It is a worthy bill. It is designed to do two things: first, to encourage students to pay back their student loans quicker; and, second, to reduce the cost of, or add value to, the student loan scheme. From that point of view I would like to go through some of the points that I think are good reasons why people will take up the opportunity.
The select committee learnt that there are a significant number of people who are risk-averse or debt-averse, and that these are the people who will take up the opportunity. We learnt that some 40,000 people have paid off, in effect, more than the compulsory part of their payments. The projections from the officials are that this bill would increase that number by another 14,000-odd, to a level of 54,800 people.
Student borrowers who have completed their degree and are thinking of going overseas would be very wise to take up this opportunity while they still have that interest-free component. The facts and the figures also show that this bill is designed so that borrowers who are overseas can take advantage of the bill’s provisions. Fifteen percent of all borrowers in the student loan scheme are overseas, and that is 77,000 people. Of that number a significant proportion have overdue payments, and they are a group that the Inland Revenue Department has great difficulty managing. It is expected that 4,800 borrowers overseas will take advantage of this opportunity. There are also carers or parents who would like to give their children a first-class education with a debt-free start; those people will certainly take up the opportunity. A basic analysis of the figures shows that borrowers in the last 3 years of their student loan repayment schedule will be advantaged by doing that.
I would like to take up the point mentioned by Mr Hipkins at the conclusion of his speech that there needs to be a safety or health warning for borrowers who enter into this situation. I suggest, from my experience, that the advice should be given long before students takes on a student loan to ensure they are undertaking education that they will see value in. There certainly is value in education, but if, in effect, students do not take up those opportunities, I say that it would be far better for them, long before they start their studies, to give consideration to taking on that debt or repaying it.
In the debate on this bill, Opposition members are effectively backing those who are privileged against the hard-working Kiwis. Members on the other side of the House want to take a serious look at themselves. They no longer represent the working class of New Zealand; they are a combination of university lecturers, unionists, and other people.
This bill has a lot to recommend it. I am very confident that it will add value to a lot of people’s decision making, and on that basis I take great pleasure in supporting it.
Hon MARYAN STREET (Labour) Link to this
Periodically the Vice-Chancellors Committee releases a report on the destination of graduates from universities, and that tends to chart the salary band that new graduates go into. Typically it is not very high. Frequently we are told that a degree will enhance people’s earning power and therefore they will be able to earn more in their lifetime—and I hope that is true. I am concerned, however, that many people who, on emerging from a university or a polytechnic with a degree, and encumbered by student debt, are not in a position for many years to take advantage of this legislation. We have legislation that is designed for the wealthy—for those who have additional money left over after they have already paid off what they need to pay off on their student loan and have then paid out for living expenses. If one has a spare $500 sloshing around after that, then this bill may be of some assistance to those people. However, for the vast majority of people this is not going to provide any relief at all. I am pleased to say, however, that there is one redeeming feature to this legislation: my colleague Trevor Mallard’s Supplementary Order Paper. I congratulate the Government on accepting the Supplementary Order Paper, even though it was not accepted in the select committee. It was accepted by the Government in the end, because it is the only thing that makes this bill tolerable and it is the only reason why Labour will move to support it.
The Supplementary Order Paper relates to the “health warning”—the piece that says “for goodness’ sake get some financial advice”. It inserts new section 45G with its heading: “Commissioner must advise borrowers to seek financial advice”. In other words, the commissioner is required in all material to provide information about repayment bonuses and make sure that people get financial advice. The only people that this bill really suits are rich, stupid people. They are people with extra money but too stupid to realise that their money would work better for them if they put it into an interest-bearing account than if they reduce a loan that does not have any interest on it. It is particularly ridiculous legislation in that the only time it is likely to make an impact on anybody’s student loan debt is towards the very end of the life of that debt. We will not stand in the way of it, however, because the Government has seen fit and seen the sense of accepting my colleague’s Supplementary Order Paper that inserts this “health warning”.