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Facts overlooked in student votes lolly scramble

Facts overlooked in lolly scramble for student votes

Deborah Coddington Wednesday, 27 July 2005 Speeches - Education

Address to Massey University students; Albany Campus, Auckland; 27 July 2005.

When I was a little girl and wanted something I couldn't have, my mother used to tell me "we can't afford it". I used to ask her why the government couldn't just print more money. Growing up under tax/spend/borrow/spend governments I learned about inflation and, incredibly at one time, the government did just print more money.

So what I have to say today won't win any votes from those who want a politician to take out the cheque book representing other people's money and write out a big fat cheque using hard earned taxes. So don't listen to me if you think I'm going to enter into the two old parties' bidding war for tertiary students' votes. National started it with a bid of $70 million a year. Labour's upped that bid with $300 million a year. Other parties will just write out a blank cheque. We are now at the start of the road that ends at the government mint.

It's cynical and despicable and a disgusting way to run the country because it cares not a fig about our children, our grandchildren and the future of this country.

ACT supports the principle of student loans - they enable young people from low-income families to enjoy tertiary education or training who otherwise couldn't afford the fees.

The best way to help students with student loans is ACT's tax cuts. Under ACT's policy graduates will have more take home pay, and can choose to pay off their loans in half the time - say five years instead of ten.

By dropping the top tax rate to 25c in the dollar a graduate earning $40,000 a year could add an extra $35.86 to the minimum student loan repayment. That would pay off the average loan (just over $14,500) in four years instead of seven years and 11 months, saving over $2,000 in interest.

Low taxes also grow the job market, increase the demand for graduates and raise their salaries. We could have every student who wants to graduating into a job and career in New Zealand, rather than going overseas.

But let's have some facts in this debate. Facts have been easily overlooked in the unseemly lolly scramble for votes.

The Brain Drain:

New Zealand has a long tradition of graduates going overseas and ACT does not believe that is a problem. The perception is, however, that New Zealand is losing significant numbers of graduates permanently as a result of student debt.

However, a study of time spent away from New Zealand by those with student debt confirms that the majority do return. Of the borrowers who left the country in 1996, nearly two-thirds had returned to New Zealand by June 2004.

Around two-thirds of all those borrowers still overseas have been away from New Zealand for less than four years and hence a significant majority of them are expected to return. Those who remain out of the country for more than five years have a low propensity to return, however.

Put this in context. More than 550,000 people have borrowed under the Student Loan scheme since it began. Less than five percent of all those who have ever used the scheme were recorded as overseas in 2004.

Furthermore, research shows that the number of immigrants with high qualifications matches the numbers of New Zealanders emigrating.

Student Allowances:

If student hardship is the issue, universal student allowances are an extremely blunt tool to attempt to solve the problem.

Rather than taking the $1 billion per year it would cost to fund universal allowances and transferring this money to all students regardless of their financial situation, ACT believes the current level of funding for allowances should be focused on cases of genuine need.

I am a good example. On my salary, either as an MP or a journalist, why should my children get a student allowance? ACT would fix the student allowances situation so that they are targeted to students who need them, rather than students whose parents are good at concealing their incomes, in other words, are asset rich but income poor.

Student Loan Repayment Times:

Medical degrees are often used as an example of the length of time taken by students to repay debt. The October 2004 Report on Student Loan Scheme (Report) states median student loan debt for these graduates is $44,080, roughly triple the median debt of those who finished studying for non-medical bachelors degrees.

Those who studied medicine, however, had made significantly better progress to repayment than borrowers who had taken other bachelors degrees. Of those who first borrowed in 1997, 26 percent had repaid completely by 2000, compared with 22 percent for non-medical bachelors graduates.

Those with medical degrees who had made no progress was low at 21 percent.

A similar analysis was also conducted of those who had taken bachelors degrees in other fields - nursing, commerce and arts. Nursing showed a similar pattern to medicine, with relatively rapid progress to repayment. Commerce degrees were roughly the same as all bachelors degrees - roughly in the middle, while arts degree graduates were making slower progress.

At May 2005 the average student loan figure was $14,941. This is defined as all amounts drawn down from a loan account, but not including the $50 administration fee and the interest charged. In December 1999 that figure was $11,885, so this is an increase of around $3,000.

Broken down by age, as at 2003 72 percent of borrowers were under the age of 30 and two percent were over the age of 55, a significant increase since 2000 - a rise of 165 percent - most likely because it's interest free while studying, you could study for the rest of your life, and never have to pay it back.

While there continues to be no interest charged on a student loan whilst studying, ACT believes those who seek tertiary education in retirement should pay for it themselves.

Taxpayer Funding on Tertiary Education (pre-election bribes!):

Per-student taxpayer spending on tertiary education in New Zealand is higher than at any other level of education.

In the 2002/03 year, the per-student figure was $11,623 - five times higher than the spending on early childhood education and 2.3 times higher than the per-student spending on schools - including school transport, special needs and other spending.

Yet it is in a child's first six years that the most learning takes place. These are recognised as the most crucial years for education.

Many of these under-sixes, and the students at primary and secondary schools, never get to the gates of a university because they have not been taught to read, write and add up.

Shovelling even more money into tertiary education will do nothing to improve the quality of graduates, courses, or institutions.

Do Fees Deter Students?

In a word, No. Prior to 1990, tertiary students paid only nominal fees. However, the number of EFTS has risen steadily since then, from just over 100,000 to around 230,000 in 2001. In 2003 the EFTS were 315,818 - so that's roughly an increase of 35% in two years.

Of course you could argue that participation might have grown even more in the absence of fees. However, research both in New Zealand and Australia shows that the demand for tertiary education is relatively insensitive to fees.

In Conclusion:

There are significant changes that could be made to improve the quality, accountability and effectiveness of tertiary education in New Zealand.

The best way to assist graduates to pay off their loans is to reduce taxes and give them more money in the hand.

ACT wants a university system that consciously and unashamedly competes to be elite. That won't happen while the Tertiary Education Commission rations resources according to political dictate.

ACT also supports the private tertiary sector and would end the discrimination against this sector, whilst tightening the governance and accountability so institutions like Te Wananga o Aotearoa could not get to their current situation and making the recovery of taxpayer money impossible.

ACT would abolish all legislation making student union membership compulsory.

ACT has seen no evidence from the student unions, apart from self- interest, to justify the abolition of fees and the pouring of even more taxpayer money into tertiary education.

So I haven't told you what you want to hear today.

Then again, those of you who support economic reality - and I know there are some in the audience - will know I'm telling the truth, not rolling out the pork barrel.

ENDS

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