Wednesday, July 28, 2010

A disaster

Stuff reports that John Key has called the student loan scheme a disaster. He's right, but not for the reason he thinks he is. The problem isn't that the government is only getting 53% of its money back, but that half a million kiwis (and the number is growing every year) have been saddled with over $11 billion of unnecessary debt, which many of them have no chance of repaying.

This is an economic, social, and political timebomb. Economic, because as Key admits, the "debt" cannot be repaid (and therefore won't be) - meaning that at some stage the government is going have to admit this and confront a large hole in its books. Social, because pervasive indebtedness among our best and brightest is forcing them overseas, to defer having children, and putting the kiwi dream of home ownership out of their reach. And political because those half-million debtors and their worried families are a constituency and a growing one, who will increasingly start agitating for their unrepayable debt to be forgiven. Reimposing interest on student loans won't change that; instead it will just make matters worse (and as Key admits, result in the de-election of any government which tries).

The scheme exists because the government in the 90's chose to underfund education to pay for tax cuts for the rich. And that is why it continues to exist today. In this Budget, the government gave away enough money to fully fund student fees in tax cuts for the rich. Priorities, I guess - John Key would rather continue to force students to borrow to eat than forgo the opportunity to enrich himself and his rich mates. But it can't continue forever. A smart government would be working towards that day, rather than trying to pretend it can continue to steal from the young to fund the greed of the old.