David Miller: The Election and Education
The Election and Education: Simply More Promises
I first applied for my student loan back in the ‘old days’. The reason I say ‘old days’ is because that’s what they where. You simply filled in all the forms on the day of enrolment, received your password and the free phone number and away you went. There was no hassle about having to provide receipts for what you spent the money on and no limits to how much you could draw down. Needless to say I made full use of such services before all the rules where tightened and as a result, the extent of my borrowing is now somewhere in the vicinity of a deposit for a very comfortable house. When election time comes around I am always hopeful one of the parties might offer a solution to such reckless borrowing and spending but I am not holding my breath. The reality is that it is costing more to become a student as each year passes and the election of 2002 will not change that.
Since the start of the 1990’s, students have had to contend with increasing fees, less opportunity to acquire financial assistance and funding cuts to the universities. It all began when Dr. Lockwood Smith became Minister of Education in the Bolger government and proceeded to cut all allowances, raise fees and then try and solve the solution with his student loan scheme. Under the ‘Lockwood Loans’ scheme, students were faced not only with rising fees but also a crippling interest rate. This meant that if someone borrowed in order to study then not only did the interest rapidly multiply the amount that was to be repaid, but there was little incentive to begin paying it back. Many students complained that with the interest National had set being over 8%, the best they could hope to do once graduating was to service the interest, let alone make payments reducing the capital.
This time around National has opted for a ‘You Stay, We Pay’ approach. Under this scheme, 10% of the outstanding loan principal for five years is written off, as long as the graduate stays and works in New Zealand. National has been quick to defend this policy claiming that it will apply to students from all institutions and will not penalise people who are forced to take time out from the workforce. However the NZUSA disagrees. The NZUSA claims that this policy offers nothing new for students. Their answer is the lowering of fees and an increase in access to allowances. In other words make them more available to more people. What worries the NZUSA is that this policy would create a bonding scheme that does nothing to address the problem of rising student debt.
The problem for the political parties is that student debt is rising too fast and any proposals to try and have that debt repaid over the long term and in the future cannot keep pace with borrowing levels. Each year more and more students are forced to borrow to fund themselves while they study. If those students cannot find well paying jobs after they graduate then the debt simply mounts. There is a freeze on interest in place at the moment and for many of us still studying, we are fortunate to have already had some interest wiped off. However even with such measures in place, any rise in inflation means that those who do not earn high wages upon graduating or are unemployed will take longer to pay off their loans.
As inflation rises there is the fear that those repaying loans will incur more cost than those who are not. However this is the reality of the situation. Education is not a guaranteed ticket to a higher wage and with more people entering the system and more institutions offering degrees, diplomas or certificates, a false expectation has been created of what is to be offered at the end of the study. Today, more employers require or request that the applicant has a tertiary qualification, hence the earning bracket people enter into is not as high as they might like or expect.
The speed with which you repay your student loan will depend upon your earnings and in the simplicity of this statement lays the answer to this debate. Unfortunately there is not much one can do about inflationary pressures except to hope that the government does not raise the interest rates to compensate for any loss of revenue they may incur as a result. It is my opinion that the Labour government will not reduce the fees after the 2002 election, let alone wipe them out completely and there will be no rises in the amount of allowance a student receives either. This is what student groups wish to see and believe will help diffuse the Student Debt bomb but it is unlikely to happen. Whichever party makes it into government with Labour will soon realise that there are fiscal constraints and these along with an inflated social agenda means that political parties can promise everything but can deliver very little. Once again students and education expect little from an election.