The government is committed to spending in priority areas. Doing that without an overall increase in spending means a reprioritising of some funds.
One of these is support for students:
The Government remains committed to keeping student loans interest free but we are also determined to reduce the cost of the overall loan scheme to taxpayers.
The scheme is very large, and not so long ago the Government was effectively writing off 49 cents of every dollar that was lent.
With previous changes we’ve made, we’ve so far managed to bring that down to 45 cents.
And we intend to get it closer to 40 cents in the future by continuing to chase overseas borrowers and through the faster repayment of loans once people have finished their study.
As in previous Budgets, some of the savings we make will be reinvested in improving teaching and research within our universities and other tertiary institutions for the next generation of students.
A write off of nearly 50% on loans is unsustainable. It is also unfair to graduates who do repay their loans, to taxpayers who pay the cost and to others whose need of public support is greater.
Chasing overseas defaulters and expecting faster repayments is sensible and moderate, though the New Zealand University Students Association doesn’t think so:
“Increasing the repayment rate is a tax increase for the 500,000 New Zealanders who have student loans. Student loan repayments are a tax, since they are collected by IRD, straight out of your pay, just the same as PAYE. It’s outrageous that graduates should have to pay higher taxes to pay for a budget short-fall which has been caused by the tax-cuts that the National government gave to high income earners,” said Pete Hodkinson, president of the New Zealand Union of Students’ Associations.
Good grief – if that’s the standard of logic and economic understanding of students, the very generous taxpayer support for students is being wasted.
And generous it is – the PM gave the numbers at the Mainland Conference on Sunday and if memory serves me correctly, about 40% of tertiary funding goes in student support, more than twice that in Australia.
What NZUSA doesn’t appear to understand is the money students borrow without interest is money the government has borrowed – with interest. The more that is borrowed, the more that will have to be repaid – with interest, from tax.
NZUSA would be the first to complain if the government didn’t invest enough in teaching and research.
If there is no increase in overall spending, any increase in one area must come from savings in another and expecting graduates to repay their loans a little faster is fair and reasonable.