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Student proposed alternatives to student support

Student proposed alternatives to student support

Christchurch Polytechnic students are looking to the Government for changes after the release of the Student Support Discussion Document, which refers to the old regime of student support in New Zealand - a system which many regard as outdated and ineffective.

“These are workable alternatives” said Christchurch Polytechnic Students’ Association (CPSA) president Mark Taylor. “Costs are high for students and anything to reduce that is a step forward”.

“Now students are coming up with their own priorities in terms of solutions” said Taylor. “The CPSA is submitting directly to the ministry (of education), and is proposing a real set of options that could go some way to addressing the problems of students”.

Among the usual student calls for reduced interest rates and increasing allowance eligibility the CPSA has proposed a range of measures including a three year waver of interest. “This is the first time that this issue has been seriously discussed, and in our survey of students it caused a lot of discussion, mainly for, but with some dissention.” The three years would allow for students to either repay a large chunk of their loan before interest gets out of hand, or students could use the time for an O.E. (an institution in New Zealand that currently hurts students as when the return their loans have ballooned).

The beauty of this proposal is that it costs almost nothing to implement initially. Yes the cost would be significant in the longer term, but the IRD would still be collecting loans from all students and therefore have no reduction in income. The cost would be put back several years as those with loans paid them off quicker. This allows successive governments time to budget and react, without putting an immediate pressure on the bank. “It should be the Government’s dream outcome” said Taylor, “a promise delivered upon, thousands of happy students and no immediate cost”.

CPIT students are now looking forward eagerly to two things, one being the final student support review, the other being the funding category review which students hope may finally be the catalyst for fee reductions.


Submission to the Ministry of Education on the Student Support in New Zealand discussion document

Submitted by the Christchurch Polytechnic Students' Association (CPSA)

Introduction

The Christchurch Polytechnic Students' Association (CPSA) is the student body representing students studying at CPIT.

The Christchurch Polytechnic Students' Association believes that decisions relating to the funding and delivery of student support in New Zealand have to remain focused on the principle that "Tertiary education has a crucial role in helping equip New Zealanders with the necessary skills and knowledge to achieve the best they are capable of and so contribute to a vibrant and successful nation"

As the second largest indebted group in New Zealand (second only to mortgage holders), students have the right to expect that this principle will remain a benchmark for assessing all support aspects of tertiary education.

Students studying at CPIT have the right to expect that this principle will remain central when decisions are made to adjust student support. CPSA also notes that the government has publicly stated it is "…committed to stabilising and reducing fees over time" and hopes this ethos is extended to the area of student support.

CPSA believes that the inequitable status of students in New Zealand society is a negative reflection on New Zealand and has ever increasing effects throughout the country. The current student support system does not treat students equitably and the effect of graduates entering the workforce with a large student loan (that may easily take ten years to pay off) are detrimental both to the graduate and society in general. The effect may thus be the opposite of that intended in that they are less and less able to contribute to a vibrant and successful nation.

It is acknowledged that political, social, educational and economic considerations make it a strategic imperative to address the rising cost of tertiary education. The proposed revisions to student support are credible in their intent to control the creep of cost to students for tertiary education however without a greater number of positive steps the review does very little to alleviate current burdens carried by students. Some of these steps will be immediately costly, and some will be less tangible but costly nonetheless.

Christchurch City has long been a high “user” of tertiary education market with four ‘resident’ state-owned TEOs and five state-owned TEOs based in other cities and also a raft of PTEs.

Central to many of our concerns about the student support review is the issue of the poor quality of information on current fees and course related costs available to the Government and the Ministry of Education. Figures used in the student support review which refer to median and mean student loans are misleading as they also encompass those past students who have all but paid off their loans, thus adding to total numbers without adding much to the pool of total debt. CPSA suggests that less misleading figures be used in the future e.g. average debt at time of graduation – this figure includes student support and course costs, while ignoring the skewing factors of interest and repayments.

It seems that approximately 20% of loans fall within the $1.00- $4000.00 mark. This is (at most institutions) less than one years tuition and significantly less than one years tuition plus any living costs being drawn down. It therefore would be an obvious conclusion that a large proportion of these debts are those affected by repayments.

Student Support deficiencies The CPSA has identified four major deficiencies in the current level and nature of student support in this country.

Child at 24? Your eligibility for a student allowance in New Zealand directly relates to your parents income level if you are aged under twenty-five. This is a serious anomaly that almost all legislation that refers to children becoming adults is in the 18-20 age bracket. E.g. Drinking, Voting, Marriage, joining the army etc.

For students, many of whom are not supported financially by their parents being judged on their parents income (especially if you are a twenty four year old who has been working overseas for a year and has little contact with his/her parents) seems an archaic and incorrect measure of eligibility for a student allowance.

This anomaly is only compounded when the marriage clause is taken into consideration – which invites “sham” marriages as a matter of course, as suddenly you are judged on your partner’s income, not your parents. As both participants are students (and therefore relatively poor) they are both eligible whereas before they were not. There are very few justifications of this, and unless remedied this “loophole” brings the entire scheme into disrepute.

Inflation adjusted? Most benefits in New Zealand are inflation adjusted, a trait that the student allowance shares with the unemployment benefit (as long as they are comparable). However what is not inflation adjusted is the parental threshold limits, which, as the years go by become more and more outdated.

This means that in a very real sense there are fewer people eligible for the student allowance now than there really should be. – To bring this submission back to Christchurch please note this CPIT example.


A small amount of this shift can be attributed to the rise in EFTS the computing for free programs have generated, but not only is the percentage of allowance eligible students dropping the raw figures are as well – this can largely be put down to non-inflation adjusted means-testing.

Loans to live? Of the two thirds of students who are unable to apply for a student allowance, most have to draw down “living expenses” creating a subclass of New Zealand society - those who have to borrow to live. No one else in New Zealand falls into this category, those who work are employed and don’t need to borrow to eat and sleep, those unemployed don’t either – the have access to a range of social assistance, the sick, the invalids, or people with disabilities are all supported by the government. Only one small sector of the New Zealand population is asked to borrow to pay the rent and buy the food – students.

Home and away? This brings up the important, and often un-debated issue of studying at home or away from home. Currently this does not factor into student allowance eligibility – if you are under twenty five and have lived with your parents within two years your parents still support you – this obviously is a misconception.

There is also the misleading concept that students can choose to live at home and therefore parents should be responsible. To use this as an argument is similar to accusing all those on the unemployment benefit of being “dole-bludgers”. Yes many students are able to live at home while studying, some of those choose not to, unfortunately a large percentage of students are unable (due to course location) or feel unable (due to tensions with parents).

The problem therefore is having this not as an influencing factor of a student allowance, as some are ineligible while not living at home for a variety of reasons, and other students collecting upwards of $130.00 while still having their way paid by Mum and Dad. The inconsistencies generated here are considerable and have little to no bearing on reality.

Solutions

CPSA is not unconstructively reactionary. We submit there are other mechanisms to deliver the outcomes sought. Among these are:

Abolishing the per-year $50 admin fee This is the most simple and one of the cheapest solutions – it is also in the unique situation of being both universal and cheap – as all students are charged $50 each time they apply for a loan this will obviously impact every new loan account created.

While not directly impacting on the student life it does send a clear message that change is on the cards and that the Government is taking the matter seriously. It also makes the transition to becoming a student a “free” one – like any other government service, such as applying for an unemployment benefit or even an ACC claim there is no fee. This stands out in the state sector as an unfair imposition placed on students that could easily be lifted.

Extending allowance eligibility (more people get something) This would allow for some of the problems mentioned above to be remedied however it would mean that either a greater number of people are eligible for a smaller amount of money or a small number of people getting the full allowance (depending on which end of the scale you shift).

The downside is, as with all cut-off margins is where to cut it off, as anything less than a fully inflation-based increase would seem token and pointless – this of course would be an expensive policy to implement. It would also do very little to alleviate student hardship faced during study.

Increasing allowance amounts. Again an expensive policy and also one that would do little for “student debt” and would not help the two thirds of students who are ineligible for the student allowance.

It would be fairly easy to implement and would cause a mixed reaction, there is very little compelling evidence to justify why students should receive more than the unemployed – if that were true student numbers may jump significantly.

Reducing interest rates

Straight reduction: This would be a significant step forward for government – as interest rates are the single most attacked policy surrounding government treatment of students (the official cash rate is floating at around 5.00% and most 2 year fixed mortgages are around 5%-6.5%) It would also be in-line with the Government’s clear intentions to remove barriers such as interest from potential students, as evidenced by the Government’s $420,000,000 policy to remove interest rates while studying.

The interest rates charged to students have been unpopular in the wider community with many concerned about the problem.

The following is a letter the CPSA received earlier this year – on investigation we found that Ms Burgess is an elderly woman who is not in education, and has no immediate relatives in tertiary education, but she still felt the need to write to us on the matter.

To members of the Student Association

I have been impelled to write to you regarding Student Loans. It is that all Students petition the Government to reduce the interest rate to 1 percent and demand that all loans be reviewed and adjusted accordingly. It was a grave imposition to have made it 7 percent when 1 percent would have covered administration costs.

Yours sincerely

Dorothy Burgess.

Facts of the letter aside, its existence demonstrates how the interest rates are probably the most contentious and easily attackable element of the student loan scheme.

Not charging interest rates for three years post-study: This would allow students a “quiet patch” following tertiary study when students would have an opportunity to do several things. Find their feet in the workplace: As many students need (especially school-leavers) some time to get to grips with full time work for the first time this interest free time would allow them the time to get settled into work and having a credible income (for many this would be the first time in their lives).

Go on an “O.E.”: a great part of the New Zealand psyche and almost a “must-do” for many students. Under the current scheme if they leave for a year to do this then they will be charged interest for this time. This will often not deter someone from embarking on this trip; however they will be seriously disadvantaged on their return to New Zealand.

Make some serious inroads into their debt. – To take David’s case – (see student support review, page 16) his debt decreases by $60 after a year of additional 10% tax (for each dollar earned after $15,964) totalling over $900. Had there been no interest for this first year David would have been able to pay of 6.4% of this loan instead of the 0.4% he did under this scheme.

This idea of not charging students for three years would have almost no immediate impact on the budget, as there would be almost no decrease in the money collected, as it would still be collected in the same manner (an additional tax post study) so there is very little incentive to the government to not implement this scheme. Although the cost is there, it is not realised for some time giving successive governments the ability to budget for the reduced income. This plan would be easy to implement, easy to justify, cheap and effective, alleviating three separate problems with the existing scheme. It is also easily adjusted – e.g. one year not three, or maybe five, etc, or even that could be parentally tested; there are a number of mechanisms that could be applied to this to make it work.
Solutions at CPIT This set of possible solutions was run past a large group of CPIT students to get a feel for what the priorities were according to our stakeholders. Here is a Summary of the responses gathered. A) Abolishing the per-year $50 admin fee B) Extending allowance eligibility (more people get something) C) Increasing allowance amounts (those who get something get more) D) Reducing interest rates (impacts all loans as soon as study starts) E) Not paying interest for three years post study (allow for O.E. etc)

Participants were asked to rank the following five options according to preference (one being the highest five the lowest).


Analysis

The options put in the survey broke naturally into two camps and an outlier – These being options B and C (the allowance options), D and E (The interest options) and the outlier being the admin fee. On the face of it there is little to recommend any of the last four options, as they all fall within a five percent aggregate range. Both “interest” options are ranked higher than both “allowance” options this indicates that that is an area which may require a more immediate solution. Of the two categories both have a “hard” and a “soft” option. This meaning that while popular the option recorded a number of fours and fives, while the other scoring in the mid ranges. – For an interest adjustment the soft option is an interest rate reduction and the hard is a three year interest waver. For allowance the hard option is raising the allowance amount, and the soft is increasing eligibility. A very rough analysis of that suggests that the soft options if implemented would gather support but not much enthusiasm. While the hard options would more likely gather a lot of support and become particularly debated within the sector and wider community – with the chance of a small backlash of “it would have been better to do X” but with some vehement defence as well. The flip side of this “good/bad” analysis which is basically the aggregate scores without the 3 scores which imply no strong feelings. On this scale the options are quite clear in popularity with interest rate reduction easily the most popular followed by options (in order) E, B, C and A, (C and A scoring negatively).

Conclusion CPSA considers the Student Support review to be credible in intent but lacking in deliverables. We suggest there are better ways of delivering an equitable, practicable mechanism, which delivers for the State and students.

There is little, if any, relationship between the world in which the Government claims to have spent (or promised) an additional $1,716,880,000 on tertiary education (sum total “what the government has done already” Student Support Review page 7) and the real world, which is still hard, inequitable and uncomfortable for students, riddled with antiquated policy and anomalies.

On the basis of our analysis of the proposals, CPSA believes a wise government could seriously consider investing in some fairly simple schemes and policies to ease the plight (bother actual and perceived) of students.

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