Nash Stuart: Student Loan Scheme Bill — First Reading 
Nash Stuart: Student Loan Scheme Bill — First Reading 
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STUART NASH (Labour) 
: 
 I stand in support of the Student Loan Scheme Bill in its first reading but I will make two points. First I will elaborate on why I think this bill is worth supporting to go to the select committee. Anything that makes it easier for Kiwis to pay back their student loans has my absolute support and the support of the Labour Party. 
H V Ross Robertson 
: He’s got a big one. 
STUART NASH 
: Absolutely. The second point— 
Craig Foss 
: How do you know? 
STUART NASH 
: Where do we go from there Mr Deputy Speaker? 
Mr DEPUTY SPEAKER 
: Order! 
STUART NASH 
: The second point I will make is that I have some concerns about the bill. As Mr Grant Robertson alluded to earlier the bill does not take into account the circumstances of many students with regard to working during varsity holidays. Therefore rather than eliminating complexity and uncertainty the bill has the potential to create a level of uncertainty. 
This bill transforms the administration of the student loan scheme and brings it into the 21st century. It is now the norm for many people living in New Zealand to use online payments Internet banking and electronic transfers. One could argue that those who have studied at tertiary education level and have taken out a student loan are technologically enabled. I do not know how people could cope in tertiary education if they were not to tell the truth. Therefore this fundamental shift is long overdue. Another argument is that people who have attended a tertiary education institution are probably more online than off it; we just look at Facebook Twitter and all these others sorts of online communication to understand the level of literacy that exists in this day and age. 
One of the major reasons why I support this bill is that it promotes efficiency. It initiates the implementation of a new electronic loan management solution which will allow student loan borrowers to manage their loans online. They can look at the state of their loan at any time from loan draw-down to final pay-off. That is good. It is proactive and it gives students a chance to feel as if they are in control. 
It may surprise the House to learn that student loan debt is currently over $10 billion and is predicted to reach $15 billion by 2015. As Mr Foss said that is a lot of money. Over 500000 New Zealanders have a student loan. The average student loan debt is over $11000. Medical students however graduate with a loan of about $75000. Student loan holders who live overseas account for 15 percent and 30 percent of all students in payment arrears live overseas. This new system will make it easier for those who live overseas to manage their student loan liability and their responsibilities. Maybe they have been out of contact or the Inland Revenue Department has found it hard to contact them. One of the reasons that I support this bill is that the department believes that the new system will increase student loan receipts by up to $22 million a year by 2014 and that is a good thing. 
Most student loan processes are paper-based. Electronic tax services currently simply convert paper processes into an electronic environment. The student loan repayment system is overlaid on an electronic system that is designed for tax collection. It is therefore difficult; it is expensive to administer; it requires significant resources to address a whole lot of errors; and the risks to the current system are increasing with the growing number of borrowers. As I said 500000 New Zealanders have a student loan. 
The implementation of a new electronic loan management solution will offer borrowers the advantages of an electronic environment and allow the Inland Revenue Department to deliver improved services to all borrowers. I doubt that anyone in the Chamber would think it is not a good idea for the department to improve services to borrowers—no one would. An electronic environment will give borrowers services that are tailored to suit their specific needs and the ability to access relevant personal information and manage their loans with a greater level of certainty. 
I will list five benefits of an electronic environment for borrowers. The first is increased certainty and reduced compliance costs. The second is a reduction in the number of contacts that have to be made and an increase in the ease with which borrowers can communicate with the department. The third is improved quality of information for both borrowers and the department. The fourth is faster processing times by the department. The final is a more prompt and accurate response to borrowers. 
There is a second point to make when talking about this bill and it is a fundamental problem. It was outlined by my colleague Mr Grant Robertson. The bill replaces the annual assessment which sits at about $19000 for the vast majority of borrowers whose income is largely from salary and wages only with a pay period assessment. Quite simply if students earn over $367 a week they will automatically start paying back their student loan. The problem is that for students who are in the middle of their tertiary course and earn money during the holidays to pay for their rent food etc. let alone their tuition fees for the following year it is totally counter-productive. The reason that students work is to earn money so that they do not have to borrow so much. Yet this bill as it is drafted at the moment proposes to take money from students before they have finished their courses therefore forcing them to borrow more. It is a sort of insidious money-go-round. I can only conclude that this is one of those unintended consequences that sneak into bills only to be ferreted out by diligent Opposition MPs who obviously have a slightly better understanding of economics than those in the Government. As it stands the logic behind this section of the bill is flawed and will have to be tidied up by the Finance and Expenditure Committee. I think we heard the chair of that committee Mr Foss acknowledge that we will tidy up this issue during the select committee process. 
During my years as a student I had many jobs; I always had a job during the university holidays. I was either pruning pine trees working in wool stores working in freezing works or labouring on building sites both here and in Australia. They were great times in hindsight I say to members. But it was hard enough paying off end-of-year overdrafts let alone having to make student loan repayments. So I hope that the Minister sees the sort of dilemma that we are putting forward and that it will be addressed. 
The legislation contains some square-up provisions but instead of making it easier for students in fact it makes it more difficult and adds another level of complexity to the whole situation. It is a level of complexity that is not needed. It can be avoided and provisions should be in place to ensure that it is. I understand that the repayment method is being simplified to avoid end-of-year square-ups for most borrowers and late repayment penalties are also being simplified and eased. I like that because all of these changes will hopefully make it a lot easier for the student loan system to work more efficiently and make it easier for borrowers to repay debt particularly overseas borrowers who have significantly lower repayment rates. Having sat on the Finance and Expenditure Committee for nearly 2 years now I know and understand the problem that the Inland Revenue Department has making contact with young New Zealanders who are overseas—usually in the UK earning money by working in pubs—and who are quite transient a lot of the time. This bill moves the responsibility back on to the students. The bottom line is that when they have taken out a loan they have a responsibility to pay back that loan. However if we can fix up this one issue that I have just outlined I am sure that Labour will support this bill all the way through the House. 
In conclusion I have talked about the importance of communicating information—important information—to a group of technologically enabled taxpayers and about the importance of an enabling system that allows people to better manage their student loans in a timely and affordable manner. That is most important. I have also talked about the importance of rectifying the situation outlined in the bill that penalises students who work in the holidays to earn money to pay for their further education. I am sure that as mentioned this was an unintended consequence. It is easily rectified. We will do that in the Finance and Expenditure Committee. It was picked up by Labour because we understand economics we understand business and we understand the sorts of dilemmas that a lot of these students face. It will be sorted out. That aside I am broadly supportive of the bill and I am certainly supportive of the principles it addresses so I commend it to the House. Thank you.