We Need Student Loans, Not Student Handouts

We Need Student Loans, Not Student Handouts

ACT New Zealand Finance Spokesman Sir Roger Douglas today welcomed Prime Minister John Key’s admission that the $11 billion in student loan debt is an economic disaster but is disappointed that he does not have the courage to do anything about it.

"While I can sympathise with students over the costs imposed on them by a bureaucratic education system, it does not excuse placing the burden of interest free student loans on all taxpayers," Sir Roger said.

"Individuals who seek tertiary education are the primary beneficiaries upon completion of their studies, through better job prospects and higher wages. Most people receiving costly tertiary education courses are from relatively wealthy families. Those who leave school and get a job, pay for those who go on to get a degree. The less well-off subsidise the wealthy. This is Robin Hood in reverse.

"There is no free lunch. The cost to individual taxpayers of interest free student loans is considerable. For example, if interest was charged and students repaid their loans, we could lower the middle tax rate by 7-10 cents or the lowest tax rate by 3-4 cents.

"It may well be true that tertiary education helps the nation. But, so too does someone who leaves school and starts up their own business. Why should the Government tax these business activities, while massively subsidising student loans?

"ACT believes that a low level of interest should be reinstated onto student loans in conjunction with a comprehensive reform of both the tax system and Government expenditure.

"By reducing Government expenditure and substantially lowering income tax, students will be far better off in the long term – regardless of the fact that they are paying interest on loans," Sir Roger said.

ENDS