The impact of interest free loans
December 28th, 2007 at 10:58 am by David FarrarNorman LaRocque from the Education Forum has just published some stats from the latest annual student loans report. Key points are:
- Despite a fall in government-funded students, the amount of money borrowed in 2006 was up 12% over 2005
- The uptake rate for full-time students rose from 76% to 82%. In 2000 it was 60%.
- Voluntary repayments have dropped from $239 million in 04/05 to $142 million in 06/07.
Also looking at the source data, I note:
- New borrowers increased 17% in 2006, after falling for the last three years
- The number of borrowers aged over 65% has increased 56% in the last year to 2,196 (are interest free loans for retired people really the best way to spend education dollars? Would more money for early childhood education be better?)
- The over 65s are borrowing the most per capita – $9,440 compared to an average of $6,610.
- Total loan balance increased by $1.7 billion from June 05 to June 07, despite the interest writeoffs!! Went from $6.67 billion to $8.40 billion – a 26% increase in two years
- the number of loans fully repaid in a year dropped from 25,294 in 2005 to 15,059 in 2007 – a 40% drop as there is of course a negative incentive against paying the loan back early now
So the summary is that despite fewer eligible students studying, more students are borrowing more money, and repaying it slower so hence overall student debt is up $1.7 billion.
The most expensive bribe since Muldoon on superannuation in 1975.
No tag for this post.
December 28th, 2007 at 11:09 am
What would the interest have been on the increase in the overall amount borrowed? That would give us a good idea of the level of subsidy.
Vote:December 28th, 2007 at 11:09 am
Interesting stats on the over 65s. Guess when you push through policy at the last minute to retain power there are unintended consequences of haste.
Funny that.
Vote:December 28th, 2007 at 11:11 am
What am I saying, what would the interest have been on the TOTAL amount borrowed. That is the true subsidy.
Vote:December 28th, 2007 at 11:23 am
“The most expensive bribe since Muldoon on superannuation in 1975.”
Although, not in anything like the same league, when you consider how many decades Muldoon’s bribe’s been in place for and the inability of successive govts to roll it back. National still tops!
Vote:December 28th, 2007 at 11:34 am
You have to remember that if you die with a student loan it gets written off. As a result many older people are taking out loans with no intention of paying them back because of this. But I doubt the government would ever put a limit on the age at which people can study it would cause an uproar.
Vote:December 28th, 2007 at 11:39 am
DPF: “The most expensive bribe since Muldoon on superannuation in 1975.”
The Electoral Commission, The Chief Electoral Officer, the Office of the Police Commissioner, the Auditor-General, Solicitor-General, governor-General every Member of Parliament from the Prime Minister down, failed to recognise any form of bribery.
Tremain and other media cartoonists had a field day with the students interest free loans.
All the above mentioned politicians had their noses rubbed in it, but couldn’t recognise a “bribe”, an offense under the Crime’s Act.
Helen thought that because she had stolen leader’s funds for her two previous pledge cards and got away with it, that her bankrupt Labour Party was entitled to dip into her leader’s Funds to assist the empty Labour Party Coffers.
When found out she complained of the Auditor-General moving the goal posts, changing the rules etc.
She then had to call on the Greens, United and NZ First to approve her theft with the Validation Act and dig her out of the hole she had dug for herself.
The EFA has dug the hole deeper but the stench of corruption still emenates and will forever in history.
Talk about The Pirates of the Southern Seas?
Dreadful to think that Benazir Bhutto sacrificed her life for democracy, and in this nation we are allowing democracy to be buried without a fight.
Was her life in vain?
Vote:December 28th, 2007 at 11:44 am
Frank, she didnt die for New Zealand. Bringing her death into this discussion is not just in bad taste, it flat out nullifies anything else you will say.
Vote:December 28th, 2007 at 11:53 am
Frank, you might as well blame Clark for the four drownings so far these holidays. Everyone knows it’s not her fault. Musta been Winston!
Vote:December 28th, 2007 at 12:10 pm
It would be interesting to see a survey on what the student loans are being used for.
My 21 year old son says that most students in his age group are using the loans to finance their drinking habits, and in his words “some are spending more of their loans on alcohol than they are on education”.
Vote:December 28th, 2007 at 12:15 pm
So the loan money is 8.4 BILLION. Now – this isn’t money magicked up from nowhere, its money that the government has either borrowed, or could use to get a return – there is a cost to this capital.
If we assumed that the cost of capital is a miserly 5%, then this is costing the New Zealand taxpayer 420 Million a year – up 85 Million. Of course, the true cost is much higher.
Remember when they were touting this policy as the answer to high student debt?
And as I’ve said before, for most people, it was never a case of not being able to pay-off their student loan; it was a matter of not wanting to.
Vote:December 28th, 2007 at 12:26 pm
The problem is that there is no going back. It was one of those irresponsible acts of government that entrenches itself.
No political party can reinstitute interest on student loans because of the balooning balance. It would be political suicide; similar to abolishing superannuation.
It is now a permanent feature of education in New Zealand. We will have to be in very dire straits as a nation before any government could scrap the policy with the support of most people.
Vote:December 28th, 2007 at 12:34 pm
Told you so.
Told you so.
Told you so.
Duh.
Duh.
Duh.
Helen, Mikhail, and all the dumb-arses who let themselves get bribed into voting for them.
Vote:December 28th, 2007 at 1:44 pm
I’d be interested to know how many students this scheme has kept in New Zealand, rather than taken their qualifications to Australia or elsewhere overseas
Vote:December 28th, 2007 at 3:26 pm
I believe any student that takes an interest free loan to finance their education should be bonded to the state. They should have to work, say for every ten thousand dollars equals one years work in the country.Why should the taxpayers fund students that have no intention of paying these back. No taxpayer is funding my mortgage why should someone have the right to a free education that will enable them to travel around the world and get a good job where they like. It’s a bit like someone paying your mortgage off, it fucking stinks. Only those that have paid their way through school should have the right to leave the country. Many will now be ready to tell me where to get off, why should someone who funds their own education do what they like. This country is infested with socialist thought, like it or not people are not born equal, never will be no matter what Dear Leader says.
Vote:December 28th, 2007 at 3:44 pm
So the rumors about the leaked emails were true? National can expect a student backlash.
Vote:December 28th, 2007 at 5:02 pm
Also of relevance: how many student loan holders did useless courses of study?
Why pick uni education as a “positive” that is to be subsidised by the rest of us, low income earners included? Isn’t being in business and providing employment just as laudable as getting a uni education?
And isn’t subsidising uni education, helping more people get “rich” and won’t this be an increase in inequality? Confusing. What DO these socialists WANT?
Vote:December 28th, 2007 at 5:20 pm
My 45 year old brother in law has been unemployed for 20 of the last 25 years. Last year he finally got off his back side and enrolled at a polytech course teaching music studio production and borrowed the $4,500 fees.
He easily passed all tests and has another year to go. He told me the other day how he considers the course to be useless and unlikely to produce any qualification any employer would be interested in. He even said he would complain about it.
However, what is worse, once in the tech environment, he now realises what courses are available and how he might spend the rest of his life borrowing and studying.
This is just one example of why politicians should be restricted from announcing new policy in the same period spending restrictions are placed on everyone else. This would allow time for in depth analysis and debate. It would also create a level playing field.
Vote:December 28th, 2007 at 6:02 pm
PhilBest: “Also of relevance: how many student loan holders did useless courses of study”?
The best of these rorts was of course Te Wananga with the “No bums on seats” courses.
Vote:December 28th, 2007 at 9:38 pm
Phil best
Told you so twice
Told you so twice
Told you so twice
Neontiger give me the those emails and I will do a H2 and make them look like Jesus Christ is the fall guy.
Vote:December 28th, 2007 at 10:49 pm
it was a sop to the middle classes.
Vote:It had nothing to do with egalitarianism.
It was a bribe.
just get used to it.
idiots.
December 28th, 2007 at 11:20 pm
You cant help but think that NZ is full of dimwits with this legislation. Of course everyone will try and max out their loans -its free money. I must have borrowed over $65,000 for my years at uni, most of it paying interest while I studied (the last two years under Helens interest free while studying policy), but I had it paid back within 4 years of working – in NZ. When I had paid it back this bribe making it interest free while living in NZ was brought in by Cullen.
Now I am overseas and fortunately don’t still have a loan charging interest back in NZ over my head. But many will leave NZ and never go back because of the loans they have accrued back home -with interest piling up. They will also complain of the taxes in NZ. Also why should I go back to NZ and pay high taxes for some losers to live it up and never contribute back? Idiots.
This will surely backfire on NZ if it is not rolled back. National must rip the bandage off.
Vote: