NCEA and subprime credit

Anonymous Teacher
Insights Newsletter
16 March, 2018

When concerned parents ask me why kids all seem to pass NCEA with little or no effort, I sometimes use the subprime mortgage crisis as an analogy. This is how it goes.
In the early-noughties, American banks ran out of credit-worthy customers. This lack stunted growth and profit, particularly in the market for mortgage-backed securities (i.e. bundles of mortgage debt). So the banks changed the rules. Under the new rules, even a ninja—someone with no income and no job—could get mortgage credit. Everyone was happy: the banks, the markets, the ninjas.
Around the same time, New Zealand’s education establishment decided that having only half the population get credit for their schooling was limiting the country’s growth. NCEA was the answer. All kinds of new, fun subjects were introduced, and teachers were instructed to only assess a student once sure they would pass. Helped by government-mandated targets, the number of credit-worthy students exploded. Everyone was happy: parents, principals, politicians, and, I guess, the newly credit-worthy.
Subprime mortgage credit took longer than expected to ruin the global economy because the ratings agencies spent years rating junk credit as AAA and the regulatory bodies turned a blind eye. Burying the junk in bundles of “good” credit, the banks created financial instruments so complex that almost no one understood them. Anyone who bought a bundle of credit had no way of knowing its exact contents. When the system could no longer bury the junk deep enough, it wasn’t just a few million ninjas who lost their homes.
When concerned parents ask me what this has to do with NCEA, I tell them that while NCEA results have enjoyed an impressive bull run our results in international league tables have slid constantly backwards. I tell them that we know that 40 percent of school leavers with NCEA Level 2 are functionally illiterate and innumerate. And I tell them that the easy targets — mostly the brown and poor — on whom NCEA foists the easiest credit, suffer most from what, in almost any other circumstance, would be called fraud.
I close by admitting that I don’t know how NCEA’s subprime credit crisis is going to play out, or how long it will take for public confidence to falter and support to be withdrawn. But I do warn parents to keep their children away from the peddlers of easy credit. Because today’s children will end up paying.

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