So, the government has hinted that the budget will contain measures to ease student debt - but by how much, and for whom? So far their response to the problem has been to tinker around the edges. They've twiddled repayment mechanisms to slightly reduce repayment time, but they've steadfastly ignored the elephant in the room: the ever-growing debt-burden on graduates.
There are a number of policies the government could pursue to both stop the debt mountain from getting any bigger and to ease the debts of existing graduates. It could fund universities at a higher rate, allowing them to charge lower fees. It could re-universalise the student allowance, so that people didn't have to borrow in order to eat. It could reduce interest rates to the rate of inflation, and stop trying to screw a profit out of borrowers. And it could start writing off debt for contributing to the New Zealand economy, rather than the Australian or British one. These are all expensive policies, but unless some or all of them are implemented, we will continue to see declining home ownership, low savings rates, and shortages in vital professions as people take their skills overseas.
Two wrongs may not make a right, but three lefts do... Preach on, brother.
ReplyDeletePoma @ notestoself.blogspot.com
> It could fund universities at a higher rate
ReplyDeleteThis is good except that universities are grosly inefficient at producing hte good they are supposed to be producing for society (and stupid attempts of late to make them more efficient have just made them better at doing the wrong things)
> It could re-universalise the student allowance
Now thats an idea - punishing peopel for studying is stupid. Actually this would all be solved by a universal benefit - but dont get me started....
> It could reduce interest rates to the rate of inflation
the problem is students are already borrowing in order to put that money in the bank. the previous optio nis better.
> And it could start writing off debt for contributing to the New Zealand economy
Now that is also a good idea but could be hard to manage.
> we will continue to see declining home ownership
This is a psychological effect as oppsoed to a real one. home ownership is declining for one or all of hte following reasons
1) it is expensive to build more houses and the population in key areas is growing (ie demand grows faster than supply)
2) investing in houses is too profitable - ie investors buy from home owners in order to rent back to them forcing prices up and home owners out of the market. Only solution here is to make home ownership less profitable than other investments.
3) low savings rates
This could result from demoralization in the face of a large student debt but it is probably - for the most part - a result of advertising of consumables (a part of modern society now) and proliferation of hire purchace deals credit cards and so forth. We could blame the education system i guess for not preparing our children for these pitfalls.
4) and shortages in vital professions
This is the killer. it is not jsut that they go overseas (although htey do and it is partly an effect of the SL scheme), it is also that they dont even go to uni. Our uni's have lots of students but not nearly so many of them are local students, or those people likely to stay in the country. Worse yet they are not in the best (economically speaking) degrees.