Media release: Changes must be made to address soaring student debt
Wellington (28 September 2016): The way we financially support students through tertiary education must be changed, says public policy think tank The New Zealand Initiative, following the announcement that the amount owed in default payments by overseas borrowers now exceeds the $1 billion mark.
Having zero interest on domestic-based loans was a way of discouraging borrowers from moving abroad, but as we surpass this milestone it can hardly be called a success.
The Dominion Post article (27 September 2016) quotes Labour MP Chris Hipkins saying that breaking the $1 billion barrier showed that the Government’s approach to tackling student debt had failed. The New Zealand Initiative agrees.
Earlier this year the Initiative released, Decade of Debt: The Cost of Interest-free Student Loans. The report took a ten-year retrospective look at the interest-free student loan scheme in New Zealand and found that the scheme has not achieved its policy objectives.
Tertiary education rates have fallen by 3.8 percentage points since 2005, students are taking longer to repay their debt and as we’re seeing, debt owed by overseas-borrowers has soared.
The scheme also fails to help students from poorer backgrounds – who genuinely need the support – access tertiary education.
“Simply put, kids from richer families who would be going to university regardless of the subsidy are the main beneficiaries, and those from poorer households and worse schools do not make it to university because they lack the necessary educational background,” says Dr Eric Crampton, Head of Research at the Initiative, and co-author of Decade of Debt.
“The main barriers to tertiary study occur before a student completes NCEA. Improving access to study at university or polytech level requires earlier intervention. Funding can and should shift accordingly.”
Decade of Debt recommended charging market rate interest on student loans and devoting some of the hundreds of millions in annual savings to enhancing low-decile students’ preparation for university, and to needs-based student assistance.
The Initiative believes this would do much more good for students who really need the help, and yield greater returns.
Read Decade of Debt: The Cost of Interest-free Student Loans (and a report summary),here.
ENDS
Media contact:
Simone Evans, Communications Officer
The New Zealand Initiative
Phone: +64 4 494 9109
Mobile: +64 21 2937 250
Email: simone.evans@nzinitiative.org.nz
About The New Zealand Initiative
The New Zealand Initiative is an evidence-based think tank and research institute, which is supported by a membership organisation that counts some of the country’s leading visionaries, business leaders and political thinkers among its ranks.
Our members are committed to developing policies to make New Zealand a better country for all its citizens. We believe all New Zealanders deserve a world-class education system, affordable housing, a healthy environment, sound public finances and a stable currency.
The New Zealand Initiative pursues this goal by participating in public life, and making a contribution to public discussions.
For more information visit www.nzinitiative.org.nz