Student loan costs

December 5th, 2012 at 7:00 am by David Farrar

Steven Joyce announced:

The latest Student Loan Scheme annual report shows an 11 per cent increase in repayments and a decrease in the overall cost of the scheme, Tertiary Education, Skills and Employment Minister Steven Joyce says. …

“The write-down on student loan lending reached 47 cents for each dollar lent in 2008/2009. We have now reduced that to 39 cents in the dollar, and are working to reduce the cost further.

  • The cost of lending has fallen 17.5% over the last three years. The cost fell from 47 cents per dollar in the 2009 valuation, to 39 cents per dollar in the current year.
  • Repayments increased by 11% to $767 million in 2011/2012
  • The median repayment time is 6.7 years and it reduces to 5.5 years for those who remain in New Zealand until repayment

That’s a pretty useful improvement in the loans scheme. In an ideal world we’d scrap interest free loans but that would be political suicide, and just be reversed at the next election. The changes Joyce has made though are sustainable and worthwhile.

The annual report for the scheme is here. Some facts:

  • Average amount borrowed $7,633 and median $6,709
  • Average loan balance $18,507 and median $12,849
  • 29% of the adult population have taken out a student loan at some stage
  • 24% of loan balances are under $6,000, 41% under $10,000 and 56% under $15,000. One third are over $20,000
  • 0.2% of loan balance are over $100,000

 

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63 Responses to “Student loan costs”

  1. somewhatthoughtful (450 comments) says:

    The changes Joyce has made to eligibility of post grads for student allowances are some of the dumbest, short term thinking this country has seen in years.

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  2. George Patton (347 comments) says:

    Extremely good news. It is not hard to feel good about Steven Joyce’s performance as a Minister.

    Since we’ve worked out that incentives matter, what else might be done at the margins to speed up repayment?

    For example, can we bond people with higher value student loans who go overseas for more than 3 months?

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  3. mikenmild (10,617 comments) says:

    ‘In an ideal world we’d scrap interest free loans’.
    Since when was a government interested in progress towards an ideal world? Governing in New Zealand is always about tinkering at the margins of current policy.

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  4. Richard29 (377 comments) says:

    The 11% increase in repayments is presumably just a result of increasing the standard repayment rates (10%-12% or whatever it was).

    I agree with somewhatthoughtful above – cutting off students half way through their masters because they happen to have exceeded a certain number of years of study is a dumb move. The most dynamic economies have Universities with heaps of post grads and lots of research occuring – he seems to be placing the focus on lots of undergrads.

    [DPF: No, that is yet to come in]

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  5. m@tt (587 comments) says:

    “In an ideal world we’d scrap interest free loans but that would be political suicide, and just be reversed at the next election”
    So instead of an ‘ideal world’ we have one where the government largely has to do what the voters want, or be punished. It’s not perfect, but it’s a damn site better than one where the government could do away with a popular policy and NOT be punished… yeah?
    I really don’t like the sound of your ‘ideal world’, or dictatorship as most people would refer to it.

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  6. mikenmild (10,617 comments) says:

    Well said m@tt. If interest-free student loans are a bad idea, a competent politician should be able to make that case to the public. In the real world, as opposed to the ‘ideal world’, some things, like student loans and retirement ages become non-negotiable items for ageing politicians who cannot see beyond one or two electoral cycles.

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  7. peterwn (3,144 comments) says:

    Labour has indicated it wants to go easy on overseas defaulters in alleged financial ‘difficulties’ (so presumably labour can go after their votes). The best solution for this is to allow the defaulter to book a one way ticket to NZ on the loan. Some woman who is in default thinks NZ government should not use Oz debt collectors as some (probably small time operators) allegedly use motorcycle gangs to assist.

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  8. Nigel Kearney (864 comments) says:

    Matt, the voters will always prefer increased spending, lower taxes, paying back national debt, reduced working hours, and more holidays. The job of politicians cannot be to give voters what they want on every issue taken in isolation.

    What I would like is for students to be required to borrow the full cost of their tertiary education, with 70% or so of that returned once they are in the workforce, in the form of a tax rebate. Those who graduate and work in NZ would be in the same position as they are now, but those who get a degree courtesy of the taxpayer then go overseas would be on the hook for the full amount.

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  9. Nathaniel (7 comments) says:

    It’s not just political suicide, it’d be economically damaging as well. Interest free loans help keep people like me (with an MSc and a PhD and a large loan as a result) in the country. If I have to pay interest where-ever I am, that only increases the lure of heading overseas, earning more money and, since repayments aren’t compulsory overseas, never paying the loan back at all.

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  10. Elaycee (4,291 comments) says:

    From the report:

    -Students have borrowed a total of $17,155 million. (Page 23)
    – $7,071 million has been collected in loan repayments. (Page 34)

    Whaaaat? Total Borrowings: $17 Billion. Total Repayments: $7 Billion. Interest free to the student. Costs being borne by the rest of us.

    I doubt too many would disagree that Interest Free Student Loans was an election bribe by Head Grinch that was doomed to backfire. And so it has – on the long suffering taxpayer. I’m looking forward to a change that requires anyone taking out a student loan to have a guarantor – and in the event that the loan goes into default, the guarantor picks up the tab. In full.. And the use of debt collectors to actively pursue defaulters. With adverse credit ratings for abusers.

    These numbers (albeit on the improve) are still unsustainable. You can’t run a business or a home on such dodgy math – why allow it here?

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  11. Elaycee (4,291 comments) says:

    @Nathaniel: So you like the idea of running up a debt and then buggering off overseas and never paying it back….

    Has it ever occurred to you that freeloaders such as yourself are a good chunk of the problem?

    Nah – thought not.

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  12. Nigel Kearney (864 comments) says:

    Of course, the interest free policy was an election bribe. So what? Labour has been very successful bribing voters with other people’s money. This strategy works politically, and they certainly aren’t going to worry about whether it is economically or morally justified. They just don’t think that way.

    The point about bribing students is that the cost per vote is relatively low compared to the cost of bribing other voters, and conversely, the amount National would save by eliminating the bribe is low compared to the votes they would lose. So they are rightly going after other groups such as public servants where there are large savings and a fairly low electoral cost.

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  13. bhudson (4,734 comments) says:

    There is no such thing as interest free student loans – they are taxpayer-funded-interest student loans.

    Any person taking out such a loan and not repaying it is simply bludging off workers in NZ. Certainly I don’t see how any people with integrity can see how it is an acceptable thing to keep bleeding the proletariat like that.

    Still, some of us have long suspected that those liberal left elites have always thought that the masses owe their intellectual betters something.

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  14. wreck1080 (3,725 comments) says:

    The political parties should reach agreement and all agree to charge interest on student loans.

    Everyone will vote themselves free money, especially students, and labour took advantage of this . Quite despicable.

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  15. wreck1080 (3,725 comments) says:

    Nathaniel , you have such a sense of entitlement to other peoples money.

    I had a student loan , paid it off, including the interest. Why should you get a free ride?

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  16. scrubone (3,044 comments) says:

    Why, if you take away my free money, it’ll damage the economy and we don’t want that, would we?

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  17. Nathaniel (7 comments) says:

    @wreck1080 and @Elaycee Who said I’d either buggered off or wasn’t paying my loan back? I’ve got no problem with paying my loan off, all I’m saying is that if the country wants to keep its highly educated specialists in the country then there have to be some incentives since our comparative salaries aren’t exactly enticing.
    What I do have a problem with are people from older generations, whose highly subsidised living has got us into this mess in the first place, passing judgement. Especially those 65+ drawing their super while still working.

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  18. Sonny Blount (1,845 comments) says:

    Nathaniel,

    It is economically damaging to provide free stuff to a part of society. Then people like me (productive, employers) will bugger off overseas when our taxes go up to pay for it.

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  19. Rick Rowling (801 comments) says:

    Interest free student loans

    Loans to graduates where the interest is paid for by other people.

    Loans to corporate lawyers (university graduates) where the interest is paid from the taxes on other people, such as cleaners and special-needs caregivers.

    FTFY

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  20. Sonny Blount (1,845 comments) says:

    ps I am under 65 and not receiving super.

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  21. dime (9,367 comments) says:

    Nathaniel – how big is your loan? 100k? That whopping 8k in savings is keeping you in the country? Really?

    Matt – you’re just nuts.

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  22. Elaycee (4,291 comments) says:

    Nathaniel:

    Who said I’d either buggered off or wasn’t paying my loan back?
    ..if the country wants to keep its highly educated specialists in the country then there have to be some incentives

    Comprehension not your strong point? I never said you had buggered off – you said that buggering off and not repaying your loan was an option for you. I called you as a freeloader if you did so – and you can’t disagree with that.

    This has nothing to do with the retirement age – so stop trying to change the subject. The problem is students such as yourself who have hoovered up from the trough called a taxpayer funded student loan scheme and then think that it might be OK if they buggered off and didn’t pay it back.

    You now want an incentive to stay in NZ? Whaaaat? An incentive apart from the highly obvious one that you need to honour your debt incurred via a taxpayer funded interest free student loan? Because why should I (as a business owner / taxpayer) be expected to cover your debt? Why should I have to pay more because you decided it was OK to run up a debt and bugger off with it still outstanding?

    You appear to be part of the generation of morons who permanently have their hand out wanting other people’s money. And the ‘right’ to walk away from any repayment obligations. You attitude represents everything that is wrong with this scheme. Everything.

    In fact, Nathaniel, your attitude gives me the shits.

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  23. hinamanu (2,352 comments) says:

    Student loans and road revenueing are all due to gross govt waste and mismanagement to keep us indebted to the state

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  24. thedavincimode (6,526 comments) says:

    Nathaniel

    Why don’t you run that argument past the people holding the stop/go signs when you drive through road works, or the people that clean your office toilets at night on the way from/to another job?

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  25. Nathaniel (7 comments) says:

    @Sonny Never meant to imply otherwise. Also, as a graduate, in theory, I earn more and therefore pay more tax, there’s a return there that people don’t factor in, so it’s not the case that, so long as I’m in NZ, the return on the loan is zero.

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  26. Nathaniel (7 comments) says:

    @Elaycee This isn’t a generational thing – we didn’t get a choice when we were born or what the deal would be. You’re meant to be covering my debt because our ideas and expertise create the avenues for you to make money. How well do you think companies like Weta workshops would be going otherwise? This isn’t about shoulds, and what ifs, this is about the current climate, and what might happen if interest came back on. I’ll probably stay, as I’ve other non-economic things to consider, but I know for a fact a lot of folk won’t – and they’re not all sub-40 either.

    People working stop/go signs and cleaners earn less, so pay proportionately less tax. Take away my education and that’s probably what I’d be doing too – less tax = less government revenue, less income = less discretionary income; neither are good things.

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  27. wreck1080 (3,725 comments) says:

    @nathaniel — I certainly did not say you’d buggered off or were not paying back your loan. Please quote where I said either of those things.

    I am saying, that students should pay interest on student loans (as I did).

    So you think the fact that you now earn a higher income with a degree is justification because you now pay more tax? Nonsense! I’m sure you didn’t begin your degree thinking that it was great that you’ll be able to pay more tax.

    You have it back to front — the fact you now earn a higher income means you should not have been given taxpayer money in the way of interest free student loans.

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  28. Sonny Blount (1,845 comments) says:

    Take a person who researches and develops a valuable new product they are able to export from NZ. Let’s say that to gain the knowledge to do this they had to get a PhD.

    Now we could either give them and a couple of other people who got the same PhD but never managed to develop anything useful, massive discounts on their education.

    Or we could give him lower taxes on the profits from the products he is selling in order to pay for any costs he had in getting there.

    Now with the second option, the productive PhD can then use the increased profits from having a more competitive environment to sell in, to offer scholarships to other people to get the education required for his or other industries – being successful themselves they are a good judge of the person and skills required.

    They could also use a reduced tax burden to hire an extra cleaner, or perhaps pay them a little more.

    The model of reduced taxes against loan handouts also keeps the supply of PhD’s in balance to the opportunities and in the areas required by the market.

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  29. Sonny Blount (1,845 comments) says:

    If you pay more tax then you can afford to pay your loan.

    Pay your bills you selfish prick.

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  30. Paulus (2,493 comments) says:

    Nathanial

    Are you ever going to get a job, or will you continue to feed off the academic pigs back ?
    I doubt any employer will take you on with those qualifiactions, as you would not fit in with other staff, being an arrogant sod.
    But the unions will find you a job, or the public service.

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  31. Nathaniel (7 comments) says:

    @Sonny Blount – My point about taxes is that the return isn’t 0% if you take into account the increase in earnings by getting the education. Your idea’s an interesting one for sure.

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  32. Sonny Blount (1,845 comments) says:

    The Nathaniel solution to NZ’s economic prosperity:

    Everybody working a job who could be paid more overseas gets a tax rebate until their net income matches so that none of us have incentive to leave.

    Genius.

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  33. Sonny Blount (1,845 comments) says:

    I see how this works Nathaniel,

    I can set up a business selling solar panels for a considerable profit. The government should give me half a billion dollars because they will make a return on the investment.

    It’s brilliant!

    There must be hundreds of years of economic history that show that this works right?

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  34. Nathaniel (7 comments) says:

    @Paullus By ever get a job, do you mean on top of the one in the private sector I already have?

    @Sonny Blount When did I ask for more incentives? Or rebates? All I have ever said is that putting interest back on loans removes an incentive to stay. I’ve never said it was the best idea, or the solution to everything, but it is in place, and removing it will give people an excuse to move on.

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  35. Sonny Blount (1,845 comments) says:

    Nathaniel,

    Do you see that increasing tax rates also gives people an incentive to leave?

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  36. Nathaniel (7 comments) says:

    @Sonny Blount : Of course. And if we get to a point at which the only choices are either increased taxes or interest-free loans, then I’ll be all for bringing the interest back. Whether we are at that point right now isn’t something I know enough to comment on.

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  37. bhudson (4,734 comments) says:

    Also, as a graduate, in theory, I earn more and therefore pay more tax, there’s a return there that people don’t factor in…

    Nathaniel,

    So people should pay for you to get the degree so that you then pay more tax? So they should give you the money for you to give back to them.

    Doesn’t make a whole lot of sense for those people.

    (Especially when you consider that they are already subsidising your fees under current tertiary education funding.)

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  38. Elaycee (4,291 comments) says:

    Nathaniel:

    …. isn’t something I know enough to comment on….

    Pity you didn’t apply that ‘logic’ before you started tap, tap, tapping the keyboard at 8.04am.

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  39. bhudson (4,734 comments) says:

    And if we get to a point at which the only choices are either increased taxes or interest-free loans, then I’ll be all for bringing the interest back.

    Nathanial,

    Best you write letters to Labour, The Greens, NZ First and Mana then. They are all planning on increasing taxes – Which you agree will encourage our brightest to leave.

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  40. Sonny Blount (1,845 comments) says:

    Please explain how it is possible for interest free student loans not to be balanced by tax revenues?

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  41. Weihana (4,496 comments) says:

    “This has nothing to do with the retirement age – so stop trying to change the subject.”

    Yes, lets not introduce anything that might show the hypocrisy of those who criticize the current generation whilst coming from a time when the government paid living and academic costs, and now provides them with retirement benefits which are not means tested.

    The whole argument about interest free loans is arbitrary anyway. Interest free is just another form of subsidy and tertiary funding was already subsidized before interest was removed and these subsidies have been decreasing ever since the student loan system was introduced leading to higher tuition fees. So for those who acquired loans before interest was removed perhaps you are not as morally superior as you like to fantasize you are. You did not pay the full cost of your tuition either. You also didn’t pay the cost of high school education or your basic education. A lot of things you didn’t pay for in fact. But somehow some of you have elevated yourself to lofty ethical heights. And if you’re an employer well apparently your moral superiority is stratospheric.

    All I can suggest is, how about we institute student loans from Primary School? Or Kindergarten to be truly ethically pure. I’ll get on the phone to Leonard Peikoff to see if he approves!

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  42. Sonny Blount (1,845 comments) says:

    Weihana,

    I had a student loan for my tertiary education and I used to pay interest on it.

    And I wholeheartedly agree that households bringing home six figures should pay their own primary, secondary, and pre-schooling.

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  43. Weihana (4,496 comments) says:

    Sonny Blount,

    I had a student loan for my tertiary education and I used to pay interest on it.

    Tertiary funding is a mixture of student fees and government subsidies. Whether or not you paid interest does not change the fact that your education was subsidized by the taxpayer.

    And I wholeheartedly agree that households bringing home six figures should pay their own primary, secondary, and pre-schooling.

    Whilst taxing them to fund the education of those with lower household incomes? Gee, what a way to punish success! :)

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  44. Luc Hansen (4,573 comments) says:

    In an ideal world we’d scrap interest free loans

    altogether and make education free for all, again.

    If education is the single best investment a society can make to assure its future, and I see no reason to disagree with that premise, then DPF’s ideal world needs a rethink, methinks.

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  45. Sonny Blount (1,845 comments) says:

    Weihana,

    And I wholeheartedly agree that households bringing home six figures should pay their own primary, secondary, and pre-schooling.

    Whilst taxing them to fund the education of those with lower household incomes? Gee, what a way to punish success!

    … there would be lower tax rates if people were paying part or all of their own primary education.

    Currently we hammer wealthy people with the burden of the expenses of lower income households, education and everything else. In addition take the tax to pay for their children’s education off them, give them horrible options in return for it, or force them to pay through their house prices for ‘better’ options. Even then a number of them will end up paying for private schooling on top of the money already taken from them for their ‘free’ public education.

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  46. Sonny Blount (1,845 comments) says:

    Luc,

    Education is right up there with the most wasteful and over priced investments going in the western world.

    An idea like

    education is the single best investment a society can make to assure its future

    is just childish.

    There is nothing that can’t be over-supplied, over-priced, or under-delivered. And education is easy area to do it in.

    free for all

    is another even more childish idea. Anyone with an education knows the concept does not exist.

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  47. Weihana (4,496 comments) says:

    Sonny Blount (1,649) Says:
    December 5th, 2012 at 11:28 am

    Weihana,

    And I wholeheartedly agree that households bringing home six figures should pay their own primary, secondary, and pre-schooling.

    Whilst taxing them to fund the education of those with lower household incomes? Gee, what a way to punish success!

    … there would be lower tax rates if people were paying part or all of their own primary education.

    … and higher school fees

    Currently we hammer wealthy people with the burden of the expenses of lower income households, education and everything else.

    Yeah, sucks to be rich. :)

    In addition take the tax to pay for their children’s education off them, give them horrible options in return for it, or force them to pay through their house prices for ‘better’ options. Even then a number of them will end up paying for private schooling on top of the money already taken from them for their ‘free’ public education.

    I think the simple truth here is that there’s only one way to lower the cost for them, and that is to lower the amount of money that is redistributed to people who are not as well off. And I suppose that is the intention.

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  48. Sonny Blount (1,845 comments) says:

    No Weihana,

    The problem is that rather the redistributing the means to people who are in distress. All control is being taken from the vast majority of people who are capable of paying their own way. this is inefficient, lowers the results for all, and increases the costs for all.

    If we released the top 80% from the tyranny of public education and healthcare, there remains a hell of a lot more means to help the bottom 20% who are too financially distressed to provide fully for themselves.

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  49. Weihana (4,496 comments) says:

    Sonny Blout,

    All control is being taken from the vast majority of people who are capable of paying their own way. this is inefficient, lowers the results for all, and increases the costs for all.

    Although a system of means testing has its own bureaucratic inefficiencies. And so far I haven’t seen you explain the inefficiencies other than having to pay for the free education on top of paying for private tuition.

    If we released the top 80% from the tyranny of public education and healthcare, there remains a hell of a lot more means to help the bottom 20% who are too financially distressed to provide fully for themselves.

    The tyranny of public healthcare? Would you prefer the US model where they pay three times the price? Efficiency indeed!

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  50. Harriet (4,497 comments) says:

    DPF#

    “…..That’s a pretty useful improvement in the loans scheme. In an ideal world we’d scrap interest free loans but that would be political suicide, and just be reversed at the next election….”

    No it’s not David.

    The Australian Federal Govt lowers the fees for subjects that are in demand, and increases the fees on subjects that are not in demand. This happens yearly, and industry is consulted each year to see what degrees are in demand.The NZ government could do exactly the same but on the ‘interest’ componant instead.

    Keep the interest ‘free’ on subjects that are in demand, like say medicine and dentistry, or are subjects that are useful to business. Then privatise into the market place the Student Loan Sceme for Art’s degrees. Trial it for say 3yr’s then review it. Cheers David.

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  51. Weihana (4,496 comments) says:

    Luc Hansen,

    …altogether and make education free for all, again.

    Not sure I agree. There should be investment and commitment from the student as well. But I agree with the sentiment that education is a great investment for society.

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  52. Weihana (4,496 comments) says:

    Harriet,

    …subjects that are useful to business…

    Why is “useful to business” the only criterion upon which education can be deemed to be worthwhile? Seems to me the individual is best suited to decide their education and the universities best suited to put funding where it is needed, as opposed to government and industry regulating from the top down.

    If business needs workers then raise the level of compensation.

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  53. Henry64 (80 comments) says:

    I’ve just this week paid off my student loan. This funded me for 2 years at UC to complete a BA in English from Dec 2008 to Dec 2010.

    Amount borrowed:$15,758.50

    I started repayments during my last semester and have continued to pay via deduction from my salary since starting work in February last year.

    Thank you very much to all NZ taxpayers for lending me the money. I had an earlier student loan covering a year of fulltime study back in 1998 and repaid that, including interest, back in 2003.

    It made no difference to me whether the loan was interest free or otherwise, I needed a loan to fund my studies. I simply made use of the government’s loans scheme according to the rules of the time. I think that being able to get a loan from my fellow taxpayers is great, but they should not be paying the interest on my loan for me.

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  54. bhudson (4,734 comments) says:

    Seems to me the individual is best suited to decide their education and the universities best suited to put funding where it is needed, as opposed to government and industry regulating from the top down.

    Weihana,

    Your statement is wholly in agreement with what Sonny Blount’s position. Which does make it strange that you tried to disagree with him on this earlier.

    Also, if you believe the above, why does the same not hold true for health care then?

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  55. Elaycee (4,291 comments) says:

    @Henry64: Congratulations!

    Its a pity that all users of the Student Loan Scheme haven’t applied similar levels of diligence when it comes to their own fiscal responsibilities – if they had, we wouldn’t have the mega-billion dollar blowout in the Scheme that we see today.

    Good luck – with an attitude like yours, I’m sure you’ll go far. :)

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  56. Sonny Blount (1,845 comments) says:

    Weihana (2,543) Says:
    December 5th, 2012 at 12:13 pm
    Sonny Blout,

    All control is being taken from the vast majority of people who are capable of paying their own way. this is inefficient, lowers the results for all, and increases the costs for all.

    Although a system of means testing has its own bureaucratic inefficiencies. And so far I haven’t seen you explain the inefficiencies other than having to pay for the free education on top of paying for private tuition.

    Better explanations than I can give can be found here:

    http://en.wikipedia.org/wiki/The_Use_of_Knowledge_in_Society

    http://en.wikipedia.org/wiki/I,_Pencil

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  57. Weihana (4,496 comments) says:

    bhudson (2,857) Says:
    December 5th, 2012 at 1:01 pm

    Seems to me the individual is best suited to decide their education and the universities best suited to put funding where it is needed, as opposed to government and industry regulating from the top down.

    Weihana,

    Your statement is wholly in agreement with what Sonny Blount’s position. Which does make it strange that you tried to disagree with him on this earlier.

    No it is not in agreement with Sonny Blount’s position that people earning six figures should self fund primary and secondary schooling. Indeed I’m not even suggesting that government not fund tertiary education, I’m simply questioning the level of their involvement in determining where exactly funding goes.

    Also, if you believe the above, why does the same not hold true for health care then?

    Why does what not hold true? Some context would be nice.

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  58. bhudson (4,734 comments) says:

    Why does what not hold true? Some context would be nice.

    Well they were your words Weihana, I would have thought you could see your own context.

    Seems to me the individual is best suited to decide their education

    Substitute healthcare for education.

    Also that is your point of agreement with Sonny Blount – individuals are in the best position to understand what they need. And that they should be free to make those decisions; free of govt constraints and coercion.

    Similarly:

    and the universities best suited to put funding where it is needed

    Again substitute healthcare providers for universities.

    You describe a classical liberal solution. That is wholly in agreement with Sonny.

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  59. Weihana (4,496 comments) says:

    Sonny Blount,

    “It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know.” – Hayek

    “…not a single person on the face of this earth knows how to make [a pencil]” – Read

    Good conceptual explanations as to the value and function of decentralized economic decisions and holy scripture for the libertarian faithful. :)

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  60. Weihana (4,496 comments) says:

    bhudson (2,860) Says:
    December 5th, 2012 at 2:10 pm

    Why does what not hold true? Some context would be nice.

    Well they were your words Weihana, I would have thought you could see your own context.

    Indeed. But a vague reference to healthcare is not the same context as the specific proposal raised by Harriet.

    Seems to me the individual is best suited to decide their education

    Substitute healthcare for education.

    And they do (often only because they have funding assistance from the government).

    Also that is your point of agreement with Sonny Blount – individuals are in the best position to understand what they need. And that they should be free to make those decisions; free of govt constraints and coercion.

    Government constraints and coercion? Government subsidizes the education institutions and provides interest free loans. I have not opposed this and have in fact questioned Harriet’s proposal to limit interest write offs to select subjects based on industry advice. Constraint and coercion indeed!

    Moreover, how exactly are the wealthy constrained from going to private school? The only concrete complaint I could discern from Sonny Blount was that they also simultaneously had to contribute towards tax revenues for public schooling. But I don’t see what that has to do with a family knowing their own educational needs as opposed to not wanting to help fund the education of those less fortunate.

    You describe a classical liberal solution. That is wholly in agreement with Sonny.

    I have questioned Harriet’s suggestion to limit interest writeoffs to select subjects on industry advice. How is that in agreement with Sonny’s proposal that primary and secondary schooling be self-funded by the well-off?

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  61. bhudson (4,734 comments) says:

    Weihana,

    Whether you intended to or not, you described a classical liberal solution as being the most effective means (in your view) to dealing with education offerings and delivery (including the efficiacy of funding distribution.)

    That is wholly in agreement with Sonny’s proposition – which is that individuals should be able to choose where to receive their education. The reduced tax was an example of how to effect that. Vouchers could be another option. Either would enable the combination of individual choice and the education providers being able to use funding effectively in that environment (as the funding would, in effect, follow the individual and their choice.)

    Moreover, how exactly are the wealthy constrained from going to private school?

    Taking this a single example for illustrative purposes, the constraint is brought about by the per child funding by govt not being passed on to the private institution (the subsidy is only about 30%). That raises the cost of private education, thereby creating a financial constraint for some families who might otherwise choose private schooling.

    Personally, I don’t think private schooling should be the exclusive domain of those you consider wealthy. The current funding mechanisms do create a constraint for those who are not.

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  62. SPC (5,334 comments) says:

    The only reason there is a cost of loans to students is that

    1. we stopped paying student allowances to (all) students, rationing this on family income circumstances (and now for undergraduates only).

    I presume the rationale is to at least encourage those from poor families to go into study rather than onto welfare, but not with the same expectation of going onto post-graduate study – now reserved for those whose families can/will support them.

    2. We “collect” fee revenue up front by borrowing borrow the money to on-lend for fee payment.

    The other option of billing students for their fees and for them to pay this at a later date is preferable to borrowing the money and calling the debt an asset (not given the cost of the interest free loan).

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  63. dog_eat_dog (743 comments) says:

    I like having an interest free loan, but I’d gladly pay it back at a higher percentage if I had to choose between interest-free or a lower repayment rate.

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