Andrew Little is musing over wiping student loan debts for graduates who take public service jobs in the regions.
“I don’t have any particular promise to make. We’re looking at ways that we can assist students to effectively write off at least a part of that student debt, through things like taking a public service job somewhere outside of one of the main centres and for the length of period that you’re there let’s look at a write-off sort of regime.”
Five pound Poms, the British immigrants who came to New Zealand on assisted passages after World War II had to work in public service jobs wherever they were sent.
That was a long time ago when the public service was much bigger than it is now which raises the question of which jobs is Little thinking of?
The government already has a scheme where graduates get their student loan debts written off for working in the regions in both human and animal health, doctors, nurses and vets for example, some of which are public service, some of which are not.
The other obvious public sector placement would be teaching, but it could be harder to fill teaching positions in Auckland than in the regions.
These days there aren’t a lot of other public service positions available in the regions that are likely to attract graduates with or without a debt right-off.
Then we get to why more taxpayer money should go to help people who have had around 70% of the costs of their education paid for and interest-free loans providing they stay in New Zealand.
Khyaati Acharya explains how much students get:
. . . Arguments then, in favour of free tertiary education ignore two considerations. The first is that governments face resource constraints which limit how much funding can be allocated to the tertiary sector. The second is that while an educated population may provide wider economic and social benefits, the greatest benefits accrue to the individual who undertook the education in the form of increased earnings, a higher quality of life and reduced unemployment.
Under the current scheme, for every dollar the government lends through its student loan scheme (as at 2014) a mere 58.17 cents is treated as an asset. This means that 41.83 cents in every dollar lent to a student is written off as an expense – largely the cost of the zero-percent interest policy.
In short, the Government expects that less than 60% of each dollar lent will be recouped. The difference then must be funded from taxes. . .
Excluding the public subsidy inherent in the interest-free student loan scheme, the average university student’s share of the direct cost of higher education fell from 32% in 2000 to 27% in 2010. The reduced cost proportion for students was largely the result of fee regulation policies, like tuition caps, which dictate to what maximum percentage tertiary education providers may increase their fees. But take into account the implicit subsidy provided through the interest-free student loan scheme, and on average, students paid 16% and government 84% towards the direct cost of tertiary education in 2010. . .
A better educated population has public benefits but the private benefit is greater.
- The more educated you are the more you earn.
- The more educated you are, the less likely it is you will be unemployed.
- A typical university graduate will earn around $1.6m more over their working life than a non-graduate- this is much higher for a medical doctor ($4m), professional engineers ($3m) and information technology graduates ($2m).
- Arts graduates earn around $1m to 1.3m more than a non-graduate.
- About 10% end up in jobs that, on the face of it, probably don’t need a degree.
- If money and job security are key motivations, then the worst choices at university are the creative or performing arts or studying philosophy and religious studies – but they earn well above the median for salary and wage earners and have low unemployment rates averaging only 2-5%.
- Taxpayers get their investment back – graduates typically pay back all the costs of their education plus another $200,000 over their working life.
- It takes an average of 7 years to pay off a student loan – the average balance on graduation is $14K.
- A degree pays off by the age of 33, where net additional earnings from a degree exceed the costs of getting a degree and the income lost while studying.
- If you are interested in university study, there isn’t really a bad option. Follow your heart and the evidence says you are likely to end up personally and economically better off.
Averages are averages – some will earn much more and some won’t get a financial benefit from their education, some will have smaller loans and/or pay them off quickly, some will have bigger loans and/or pay them off slowly.
But a tertiary education does pay off for most people and the average loan on graduation is $14,000 which is paid off within seven years.
Expecting these better educated, higher earning people to pay off the loans they incur for a very small proportion of the cost of their education is not a big ask.
The people who will benefit most from the policy Little is musing on are those best equipped to help themselves.
There are far more pressing needs for money that will have a greater public benefit and/or help those who are less able to help themselves.