Tax cuts offset loan repayment increase

Kiwiblog has a chart showing net income after student loan repayment increases.

. . . This shows that all graduates will have higher net incomes than in April 2008, even after the repayment rate increases. In fact they will also have higher net incomes than in October 2008 and in April 2009.  So all graduates will still have higher net incomes than before the tax switch, and considerably more than before the other tax cuts.

The other factor of course, is that you keep the tax cuts for ever. . . .

Maybe not forever if we get a Labour/Green/NZ First/Maori/Mana government which in spite of the opposition rhetoric shows that students are still better off under National.

Students have some control over how big a loan they incur and even more over how quickly they repay it. There’s nothing we can do about tax increases.

When loans are interest-free there is no incentive to pay them off quickly unless the borrower takes the altruistic approach that repaying the money faster is better for the country.

The government’s policy change to require faster repayments will free up more money sooner and as the Herald points out, start rebalancing tertiary funding

Given the choice between a loan, the repayment of which cuts in to net income for a relatively short time, or higher taxes which cut into net income long after a loan would have been repaid, students are better off with loans.

 

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