Sunday, 13 January 2013
Student Loan Exiles
Student Loans for education is the biggest mistake in financial policy that the "right wing" has ever purloined from overseas cadres. And by the right wing, I mean both the right wing of the Labour party and the left wing of the National Party:
Phil Goff had explored enacting the Student Loan scheme, prior to 1992 when the National Government entered power and was able to quickly establish the scheme on the 21st December 1992. Lockwood Smith was the Minister of Education.
The following article on changes to the loan scheme in the Herald:
This article has a moralistic angle based on an interview with the hardworking Peter Dunne. Personally I am surprised to see Peter Dunne take a moral position on the student loan debt, when he was more realistic about outstanding child support debtors. The less punitive the scheme the greater the likelihood of tax compliance. If penalty after penalty is added to a high interest rate loan then you tend to have a larger portion of the population with nothing to lose and everything to gain if they walk away from the debt.
Always be careful if legislation is presented in a way that there appears to be a moral aspect. We are dealing with economics and taxation. Morals have no place here. It is desirable to have the expedient enactment of tax law that broadens the tax base to pay for the essential services underpinning civil society. Arguments for and against expenditure should be made on the basis of cost vs benefit to society. Morals are irrelevant. We've forgotten this over the last two decade of political argy bargy.
There is a huge swath of Student Loan Exiles out there. They will not pay the loans back if it compromises their situation. They will pay it back if it doesn’t.
At the end of the day you can’t wag your finger and say, “Naughty Boy or Girl, pay up”!
That may have worked for previous generations. Generations that operated under an entirely different education funding scheme and an entirely different set of morals.
Today's borrowers are a different breed entirely. We're more mobile and have as many opportunities in other countries as we do in New Zealand.We are more pragmatic and less honour bound.
As for the integrity of the student loan scheme: No wonder it’s all turning to custard.
It’s common sense, innit?
If you loan money for a non tangible asset then of course you’re not going to get a good level of debt repayment. There is no incentive to maintain payments if there is nothing to liquidate.
Is it any surprise that a that a large number of borrowers are going to default? It is a bad business model. If you make a loan then you expect to kiss it goodbye unless you have collateral.
At the end of the day if you’ve fucked up the business model so that a substantial portion of borrowers default, then you've only got yourself to blame.
So it's rich for the National government to go all, "boo hoo", about loan defaulters when there is nothing to repossess to keep the integrity of the loans sound. The failure was to foresee the likely consequences in the initial implementation. Labour should have scrapped it but not even Helen Clark had the balls. It’s more than obvious that drastic changes to the education system need to be made. Pity no one has the cojones to do so.
To the “hang ‘em high”, crew, who suggest You don’t get net economic benefit to New Zealand with that attitude. Make it easier for borrowers to repay with zero interest rates on overseas borrowers. Getting debt collectors onto individuals makes them take up citizenship in other less punitive countries.
I was sat down in our school auditorium in 1992. I was in the seventh form and our class year was told that if we wanted to go to university, then we would be borrowing money off the government and repaying it when we got a job.
It all meant nothing to me. I wasn't politically aware. I wasn’t aware that the education system had been totally turned on it’s head. One year you were eligible for a student allowance and then the next year you were putting your education on tick.
I’d never even used Eftpos at that stage. I had a bank account that I deposited money from my job and I withdrew the money if I wanted to buy something. I painted our local picture theater to earn money for varsity but there was a huge disparity between what I could physically earn in the six week break before I left for uni. I don’t have a poor work ethic. I’d worked after school at the local supermarket since I was fifteen. I started on $2.38 an hour.
I didn’t understand what credit was. I didn’t totally get the full ramifications of borrowing something until I had a stereo repossessed when I was twenty. By an agency with a valid business model. At the end of the day, it had something to sell on when I defaulted. The New Zealand government doesn't have any collateral. . It's in serious schtick.
There is a saying; "You cannot fix a sick situation with the same sick thinking that caused it in the first place. This is the problem. You still have the 1991 National Government tinkering with an outmoded scheme. Bring in some fresh blood, New Zealand. Chief bean counters; Ryall and English have had their play in the paddock.
Fully fund tertiary fees for each New Zealand citizen. Bring in a voucher system. Everyone has one poke at the pav. One taxpayer funded chance at obtaining a tertiary qualification.
Student Loans only for living costs and to be secured against an asset. A house a car, etc etc. And there should be no place for student dole except for the very needy. We've become a handout nation. Education should be a compact between the State, students and the students parents. Every party should be contributing financially.
I'm a student loan exile now. After a one year repayment holiday, I'm now expected to make payments on my Student Loan. How do I do this with no outside income? I'm a Housewife!