Ex-Students paying price for Govt Economic Mismanagement

Sunday, 1 July 2012, 4:01 pm
Press Release: NZUSA

Ex-Students paying price for Government Economic Mismanagement

The Government has increased repayment rates against early warnings from treasury in order to reduce the subsidy built into the loans scheme from 45 cents to 40 cents in the dollar. The subsidy arises because of long repayment times and the interest free policy, introduced to reduce repayment times and improve access to tertiary education.

The so-called subsidy is itself controversial, since it is based on a discount rate of over 9%, far more than the government’s cost of borrowing, and more than three times the cost of inflation which is often used as the measure of the depreciation in the value of money.

If we used inflation instead of this very high discount rate, then the average graduate, borrowing $12.800 and paying it back over 5.5 years, would pay 93.5% of the real (inflation adjusted) value of the loan. This is nothing like the 40 cents in the dollar subsidy the government claims.

Further, most of the loans are paid directly to the tertiary institutions, which have accordingly been able to increase fees at a faster rate than inflation and to expand.

Even if half the loan was written off, it’s cheaper for the government to provide funding for the tertiary sector through the loans scheme than increasing funding per student place, since students bear the cost.

In 2009 the cost per dollar of lending was 39.15 cents per dollar, which is below what the government now wants the cost to be. Since this has happened entirely on the government’s watch they need to take responsibility, rather than simply shift this cost onto former students – who signed up to one loan scheme and are now being presented with another.

The big shift was in June 2009, when a revaluation of the loan scheme “book” reduced its value by $780 million. This was because when they looked at the individual loans and the repayment times the Treasury realised that (a) wage growth was going to be lower than had been expected, so the repayment times would go up, and (b) that more people seemed to be going overseas than before, and their loans were unlikely to be collected.

These changes led to the cost per dollar of lending leaping from 39.15 cents in June 2009 to 47.39 cents in June 2010, and stabilising at 45.25 cents in June 2011.

The answer to these changes is not for the government to impose an extra burden on graduates who are already struggling in a weak economy. The answer is to do the things that they promised to do when they were elected: increase wages and stop the flood of kiwis going overseas.

NZUSA is the national representative body for tertiary students and has been advocating on student issues since 1929.

ENDS

© Scoop Media

NZUSA - New Zealand Union of Students' Associations

We stand for opportunity, for all.

NZUSA is the New Zealand Union of Students' Associations, the national body that represents New Zealand's students' associations and the interests of New Zealand's 400,000 students at universities, polytechnics and in trades training.

We conduct original research, advocate to Government and through the media, and support New Zealand's students' associations to be more effective on behalf of their members. We advocate alongside Te Mana Akonga – The National Māori Students' Association, and Tertiary Women New Zealand – The NZUSA Women's Caucus.

Since 1929, we've believed in a society rich in opportunity, where anyone from anywhere can become any thing. We support accessible, affordable quality public tertiary education.

Contact NZUSA - New Zealand Union of Students' Associations

• Website - www.students.org.nz
• Twitter - @studentsnz
• Email - president@students.org.nz
• Facebook
• Physical Address - Level 8 Education House, Wellington, 6011
• Postal Address - PO Box 101091 Wellington
• Phone - +64 27 868 4989