Calculations

The release of Labour's interest-free student loan policy has clearly left the right gazumped, and they have been desperately flailing trying to find a way to counter it. So far this has manifested as an attack on the accuracy of Labour's calculator in an effort to argue that it overstates the benefits to borrowers. Nigel Kearney's efforts in this area are nothing but a strapped chicken - as is obvious from the blatantly stacked assumptions. 6% salary growth (the average is a mere 2.4% - less than inflation)? Twice the repayment rate under the present scheme (there will be some effect, but we should be comparing like with like)? Entirely arbitrary tax reductions? It's a perfect case of stacking the asusmptions to produce the desired result - do they teach this in right-wing school or something?

Meanwhile, DPF parrots Bill English's comparisons with other loan calculators - but as Just Left points out, this seems to be due to differing assumptions about salary growth, inflation rates, and whether the output is presented in real or nominal dollars. The latter is particularly important; with a long enough repayment time, the NPV of accumulated interest can shrink dramatically, even at a discount rate of only 2.8%.

But there's also two more general points I'd like to make. The first is that the right is being inconsistent in trying to claim that the loan writeoff will deliver less than graduates expect, while at the same time trying to wildly inflate the cost. They can't have it both ways, and they should make their mind up which claim they want to push. But more importantly, DPF's nitpicking over numbers is fairly irrelevant, because regardless of which calculator you use, a full interest writeoff is still worth more than a 33% rebate, particularly to those on incomes which do not meet their interest payments (of which there are far too many). No matter which way the right tries to spin it, student loan borrowers are still better off with Labour.