Loan Repayments: Start too low, demand too much
The New Zealand Union of Students’ Associations has condemned the increase in the student loan repayment rates announced by Stephen Joyce today as starting too low and demanding too much from graduates.
“New Zealand graduates already make payments from a level of income below any other income-contingent loans scheme in the world; the rate of payment proposed will now also be higher than is demanded anywhere else,” said Pete Hodkinson, President of the New Zealand Union of Students’ Associations.
Australians pay on a graduated scale of between 4% and 8%, after the graduate earns over $A48,000. In the UK it is 9%, after £21,000, with a year’s grace before payments start. “When the proposed changes come in, a graduate in New Zealand on $37,000, which is around the average graduate salary, will be paying 29.5 cents in each dollar in income tax (PAYE) and loan repayment. In Australia a graduate earning the same pays 15 cents in the dollar tax and nothing on their loan,” said Mr Hodkinson.
“The Minister is wrong when he suggests that this will help students by making them pay their loans off faster. Instead this will simply be unaffordable for many people.”
“Most graduates aren’t earning lots of money straight out of study, and they have the costs of establishing themselves in work, and hopefully as home owners and starting families. For a significant number this extra money will mean that essentials will now be out of reach.” “Loan payments are slow in New Zealand because wages are low. That’s where the government’s focus needs to be. Higher wages will speed up payments, and would be from people who can afford it, not from those who cannot.”
“Even the impact on high-earning graduates, who have graduated a few years ago, will have negative knock-on effects, as they cut back on discretionary spending, and put at risk New Zealand’s fragile economic recovery. Hundreds of thousands of graduates spending $30 less a week will see millions dragged out of the economy, with job losses sure to follow. There is a reason that no other country has as punitive a repayment scheme as the Minister is proposing,” said Hodkinson.
NZUSA is the national representative body for tertiary students and has been advocating on student issues since 1929.