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Getting to the truth about Students Loans

NZUSA Media release: Wednesday 7 November

Getting to the truth about Students Loans

A call to apply greater public scrutiny to the Student Loan Scheme was made in an oral submission by the NZ Union of Students’ Associations (NZUSA) to Parliament’s Finance and Expenditure Select Committee today.

“We have an on-going concern that the limited scrutiny being applied to the law underpinning the scheme just isn’t good enough, especially when fundamental aspects of the scheme just don’t add up,” says Pete Hodkinson, NZUSA President.

“One of our challenges to the Select Committee today was that after 20 years of creating a disproportionate debt mountain – now well past the $12 billion mark – it’s time to hold a serious review of the scheme on behalf of the almost 1 million people whose lives have been affected by it.

“The call for such a review – in tandem with a Select Committee inquiry into equal education opportunity – is gaining cross-party support. A review would look for more equitable alternatives to the student debt model, and would reframe the debate”.

A large part of NZUSA’s submission took Select Committee members through an argument that the number crunching for the Student Loan Scheme does not provide a true representation of the net affordability of the scheme to the government compared to its unaffordability to students. NZUSA’s concern is that claims of the high cost of the scheme are being used to justify cost-cutting measures by the government in a way that reduces access to tertiary education and potentially misleads the public.

Select Committee member and NZ First leader Winston Peters’ reaction was that this sounded to him as if the scheme “would constitute a fraud on the investor (students)”, while Labour MP David Clark agreed that NZUSA statements about the true cost of the scheme were closer to the truth than indicated by the official record.

In addition to a set of eight recommendations [available at] NZUSA expressed frustration at all of the behind-the-scene changes that are made by way of regulation without a full and searching investigation into the major impacts being felt by significant groups of students. Students such as postgraduate students, medical students represented by the NZ Medical Students’ Association, older adults (55+) seeking to retrain, and students with dependent family members – primarily women.

“When all of the incremental changes being made to the scheme are taken into account what we are left with is a scheme that is in danger of running counter to its own goals of promoting access, as well as a scheme that is only guaranteed to heap a negative fiscal drag on each new generation, to push more New Zealanders overseas or discourage them from returning, and to further ignore the GDP benefits of greater participation in tertiary education,” says Pete Hodkinson.

Note to journalists: The 2012 Annual Report of the Student Loan Scheme is expected to be tabled in Parliament later this month or in early December.
For more information see


Written submission
1. That in its deliberations on the consequences of the bill the Select Committee thoroughly consider any aspects of the bill that will actually worsen the current situation of affected students (present and future) in unfair or unreasonable ways, and flag those for current and future reference.
2. That the Select Committee clarify the methods being used to communicate with students about Budget announcements and the supply of further communication (e.g. FAQ information) that is detailed and balanced, to students.
3. That, given an environment of rising living costs (high rent in Auckland being a case in point) and a constrained job market, the Select Committee consider how adequate the current student support package is for students who are struggling to afford tertiary education.
4. That the Select Committee should interrogate the regulatory impact statement accompanying the bill to gain a sense of the financial setback a higher repayment rate will have on the (estimated) 440,000 affected borrowers.
5. That implementation of tertiary education policy in New Zealand remain focused and driven to achieve more social inclusion and a much higher level of social mobility (New Zealand’s intergenerational mobility being at the bottom of the OECD according to this year’s OECD Education At A Glance report).
6. That an overall review of the SLS be considered with urgency and commenced in 2013. This recognizes that the SLS has over the last two decades undergone a number of variations and requires a major rethink. This review could be easily allied to a proposed (Education and Science) Select Committee inquiry into equal educational opportunity.
7. That the economic downsides of encumbering new generations of graduates from our Institutes of Technology/ Polytechnics and Universities with unaffordable debt levels be taken seriously, and that the Green Party’s proposed solution of a progressive non-punitive repayment scheme be further investigated along with approaches that exist in other jurisdictions. A minimum would be a much higher threshold before repayments begin, and a more equitable repayment rate would at least bring us into line with Australia.
8. That the Select Committee seek to hear directly from groups of students such as Postgraduate students and NZMSA on matters that are materially jeopardizing completion of their studies. (NZUSA can facilitate this with the Select Committee Secretariat).
(Reiterated in the Oral submission to include recommendations that the Select Committee
• Acknowledge the true cost of the Student Loan Scheme
• Undertake a review of the loans scheme in terms of its contribution to the goals of more social inclusion and greater social mobility
• Urge the reconsideration of the unaffordable debt levels imposed upon students who undertake courses for which there is acknowledged to be little (or no) financial return
• Consider as a matter of urgency a shift away from starting payments so low and imposing so high a uniform rate of repayment as compared with international practice and the needs of borrowers and the New Zealand economy)

NZMSA calls upon the Select Committee to consider introducing either an exemption or an extension to the 7EFTS cap on Student Loans for medical students in this Bill in order to protect equity of access to the medical degree for postgraduate/other- entry students. Doing so would improve the value of the Student Loan Scheme for New Zealand’s medical students and the New Zealand health system.

1. Given repeated concerns raised about the efficacy of the overall SLS will the Committee consider the call made by Opposition MP Grant Robertson during the First Reading for “an overall review of the scheme”, including a review of the adequacy of student support in 2013?

2. Clear communication about the nature of the SLS is extremely important and the role of the Select Committee in establishing correct information is vital. Is it correct to state, as Opposition MP David Clark has done, that the student loan collection system “works as a tax”?

3. A large emphasis of this bill is to extend provisions for data-matching. Data-matching and data privacy concerns have become more and more acute in New Zealand due to a series of highly publicised lapses and data breaches. In the wake of the WINZ Kiosk debacle, NZUSA sought and received an immediate assurance from Studylink that student data was within the scope of a review of the MSD’s network security. Will the Select Committee be seeking a full briefing by officials and the Privacy Commissioner on the impact of any information sharing under this bill, and will information from that briefing in turn be shared to all interested or affected parties?

4. On the bill’s First Reading, Government MP Jonathan Young stated that a student should not come away “with indebtedness that does not give, at the same time, an opportunity to gain employment”. Given the impact of the indebtedness that is created by the SLS does the Committee consider that an opportunity to gain employment is a reasonable expectation for new graduates to have for the investment they make, and as part of the ‘social contract’ they enter into?

5. We understand that Working for Families entitlements are calculated before student loan repayment rates (increased this year by 20%) and that resolving this unhelpful anomaly could be addressed through this bill. Will the Select Committee be addressing this anomaly?

6. In referring to the “integrity” of the SLS the Minister of Revenue, Hon. Peter Dunne, stated that this year’s move to reduce the repayment holiday for borrowers who are going overseas (subject to application to IRD) from 36 months to 12 months is “instilling greater fairness and accountability”. Given this assertion has been challenged in Parliament in the context of the current bill, will the Select Committee be forming a view on whether this can be verified as a true statement?

7. On the First Reading of this bill Opposition MP Tracey Martin queried why all domestic students or new graduates who remain in New Zealand and who have been hooked on to the SLS should not also be able to apply for a “repayment holiday”. Given that a period free from repayments is an automatic feature of the equivalent scheme in the UK, should not the Select Committee investigate treating all borrowers in the same way?

8. For those borrowers who are overseas, Opposition MP Louisa Wall raised an important concern that very little is known about them to ensure that their targeting under this bill is as non-prejudicial and as free from discrimination as possible. To achieve that goal Ms Wall suggested a case by case analysis would be needed. Can the Select Committee consider an investigation that will better profile the composition of the 91,000 borrowers living or travelling overseas?

That in the exercise of its special powers the Select Committee seek guidance from officials as to which of these questions it can give a priority to in its findings, and provide answers for (on a question by question basis).


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