Wednesday, July 27, 2005



Unprecedented?

National seems to have been caught out completely by Labour's student loans policy, and so is flailing around calling it "desperate", "irresponsible", and (best of all) "an election bribe on an unprecedented scale".

It costs $100 million, rising to $300 million in later years. If that's an "unprecedented bribe", what should we call promising billions and billions in tax cuts to the rich?

As policies go, this is actually quite a modest one cost-wise (and the "cost" is forgone income rather than actual spending in any case). But it affects a huge number of people - 460,000 borrowers, their partners, parents, and children - all of whom have a stake in reducing the crippling burden of debt. Now, people might actually be able to repay those loans, rather than carrying them with them for the rest of their lives, and they might be able to buy houses, save for retirement, have kids, and generally a future. It's a fine example of what "socialist" policies can do and how government can help (even if it is only by undoing the mistakes of the past).

9 comments:

Why bother paying back the loan if it's not accumulating interest. Better to pay what I have to and save the rest.

Worse still, people now have an incentive to draw down as much as possible on the student loan scheme as it basically becomes a free loan. Admittedly it's much harder to spend the money on something other than fees and course materials, but if you can afford those anyway, it does end up unfairly benefiting the rich.

I'd rather a scheme where the government matches the dollars I pay back, and tries to keep graduates by providing more funding to research, restructured away from the winner takes all scheme they have at present.

(But yes, National claiming that Labour are making an election bribe after being outbidded is comedy gold.)

Posted by Anonymous : 7/27/2005 11:43:00 AM

This was either a remarkably astute card for Labout to've held up the sleeve, or a flailing act of desparation that has landed perfectly..
I'll give credit (for now) for the former.. am very curious to see the results of the next set of polls.

Posted by Huskynut : 7/27/2005 11:56:00 AM

Personally I intend to continue to pay back my loan as quickly as possible. Even if Labour do get in and do this (which I really hope they do) there are no guarantees a later government won't then start charging interest again.

One thing I learned from National in the 90s is that you simply cannot rely on governments. They may at any time make fast, unjust and arbitrary changes to the environment that you live in with little regard to you or what you may have thought you could count on. It is best to factor that into your life plan as much as possible.

Posted by Make Tea Not War : 7/27/2005 12:14:00 PM

Anon: I think that shifting the loan scheme to more of a "tertiary tax" handled invisibly by IRD is part of the point. Yes, it allows gaming - but so does the present scheme if you have rich parents and piles of cash in the bank, and I don't think the prospect of abuse by a tiny fraction of borrowers (which we can't stop anyway) should prevent us from assisting everybody else (any more than the prospect of benefit fraud should rule out having a welfare system).

There are other ways to fund this sort of change. Dollar matching is one way, higher EFTS funding another. but this makes it quite clear that the government understands the problems caused by debt, and is willing to do something about it. The fact that its overwhelmingly popular is a bonus :)

(As for research, I agree, the government should be increasing funding in that area. But only a tiny fraction of graduates end up in academia or science, and the policy should reflect this).

Posted by Idiot/Savant : 7/27/2005 12:18:00 PM

Great. Now I just need to find a geology job in NZ and it might be worth coming back.

Posted by Weekend_Viking : 7/27/2005 12:19:00 PM

Yes - they still haven't solved the other part of the tertiary equation: ensuring that there are jobs which actually use those expensive skills.

Posted by Idiot/Savant : 7/27/2005 12:26:00 PM

What interests me now, intellectually, is what Labour have planned for the rest of the campaign. They can't possibly be hoping to cruise on this for seven weeks, people have ridiculously short memories.

Posted by Ghet : 7/27/2005 12:36:00 PM

I'm sure Labour has plenty more up its sleevies. This was a killer idea tho, because everyone knows someone who's up to their eyeballs in debt who is now telling them to vote labour, and by targetting it at the people who are living in NZ they're encouraging graduates to stick around and help the economy, which is crying out for qualified staff in some areas. And to be more cynical about it, how many of those overseas students can be bothered voting?

What I find particularly amusing is the nats who are crying out that this move will "primarily benefit the rich" - now if that isn't the height of hypocrisy given their own policies, I'm not sure what is. Besides, the rich people are more likely to have connections that get them good jobs that will force them to pay off the loans faster - you don't get to choose not to pay back the loans once you're actually earning.

Posted by Sethop : 7/27/2005 02:12:00 PM

I/S,
You know - I might even vote labour and I support things like further subsidization of uni fees but even i think htis is irresponsible because it has such a huge potential to distort behaviour.

> It's a fine example of what "socialist" policies can do

So my point is that a socialist policy like "more havily subsidized education" is actually better than one of "no interest on loans" you get more bang for your buck from those policies.
It is frustraiting when a political group has different aims but it is even more frustraiting when htey have the same aim just a really stupid way of achieving it.

> (But yes, National claiming that Labour are making an election bribe after being outbidded is comedy gold.)

haha indeed.

> This was either a remarkably astute card for Labout to've held up the sleeve

I think really close to the election might have been a better idea - because its ok on the face of it but in dinner table debates the conservatives will have the liberals for breakfast.

> One thing I learned from National in the 90s is that you simply cannot rely on governments.

rational people can save money in an interestbearing account significantly faster as they can pay off a student loan I advise you not to be a patsy to the cynical people and to pay off your loan fast.

> There are other ways to fund this sort of change.

the problem is that the other ways are better. if htere was no other way then we would accept your point and the policy would be acceptable.

> The fact that its overwhelmingly popular is a bonus :)

> (As for research, I agree, the government should be increasing funding in that area.

I think there is too much random funding of research - I can hardly think of a research project (although from what I saw the engineering school may actually be quite good) that is worthwhile except as an educational tool. Worse yet the pressures in university are to corrupt the research.

If hte research was indeed productive in itself (as opposed to by some academic standard) then I am all for the funding.

Posted by Anonymous : 7/27/2005 10:35:00 PM