Ardern Jacinda: Student Loan Scheme (Repayment Bonus) Amendment Bill — Second Reading In Committee Third Reading 
Ardern Jacinda: Student Loan Scheme (Repayment Bonus) Amendment Bill — Second Reading In Committee Third Reading 
[Volume:657;Page:6612] 
JACINDA ARDERN (Labour) 
: 
 I am pleased to rise and speak to the Student Loan (Repayment Bonus) Amendment Bill and to support the statements that have been made by my colleagues up until now. Before we go too far into this debate it is important we size the issue we are talking about. I have done a little bit of reading on the current state of our student loan scheme the uptake rate the size of the debt and the number of young people who are impacted by this scheme as it stands because I think it is important that we understand how many are captured by this bill. 
Twenty-three percent of New Zealand’s population over the age of 15 have used our student loan scheme. That is massive. Every time either this Government or past Governments have changed the scheme it has impacted on quite a significant part of the population. That is an important factor to keep in mind. As of June 2008 530000 young people in New Zealand had a student loan. That is quite a significant number of young people who would have greatly welcomed Labour’s significant policy change at the election before last when we removed interest on student loans altogether. That was the most significant change I have seen in my lifetime in terms of improving our student loan structure as it currently stands. 
But what does the bill do? Before I go down that track I will talk a little bit more about what the bill is trying to achieve. In order to establish that one needs only to look at the commentary on the bill. It states that the bill’s “aim is to encourage borrowers to repay more than the compulsory minimum amount so that they pay off their student loans sooner.” That is a very admirable goal. Why would we be trying to achieve such an admirable goal? Well one does not have to look past for instance the study on doctors in debt which found that two-thirds of doctors intended to travel overseas after they graduated in order to pay off their debts sooner. Students are willing to go to great lengths to pay off the significant debt that hangs over them. Student debt has almost doubled. The average debt in New Zealand for a student has almost doubled since between 1992 and 2007 if my memory is correct. We need look no further also than the 10-year student income survey which found that 89 percent of students with a loan said that their loan impacted on their future savings. The collaborative study by the New Zealand University Students Association and the New Zealand Medical Association found again that 83 percent of students found it difficult to save as a consequence of their student loan. Those reasons in themselves are good enough reasons to try to deal with the issue but anecdotal evidence suggests that student debt also impacts on housing and child rearing. 
There are very good reasons to try to assist our students and young people to pay off their loans sooner. Will the bill do it though? I have a lot of questions about that. Firstly what helps students pay off their loans sooner? First and foremost it is having the cash to pay off the loans. It is the jobs they are able to get after they leave university and the capacity they have to earn. Women students are significantly impacted by this. We know that given our pay equity issues in New Zealand women will be worse off than their male counterparts. That will impact on the rate at which female students pay off their loans. That is the first place we need to look. 
The second place is the incentive issue. Students will pay off loans sooner if there is an incentive for them to do so and if they have the capacity to pay in the first place. That means that the bill will positively affect those who are already able to pay off their loans quicker. They have the spare cash available. That is what incentivises those particular students. 
But beyond that we also need to look at whether any financially literate student will benefit from the scheme. I think that is why Trevor Mallard’s amendment is so critical. It is imperative that we be honest with students. If we are and the aim is that they pay off their student loans sooner then surely we should be providing them with advice that they might actually be better off keeping the money in the bank earning interest on it and then paying off something later down the track. It is important that we are honest about what we are doing in the bill. I think Trevor Mallard’s amendment does that but without it I think there is a long way to go on the kinds of incentives and arrangements that we try to put in place to tackle what is a significant issue in New Zealand. 
The question was put that the amendment in the name of the Hon Trevor Mallard to clause 4 be agreed to: 
to insert the following section: 
45FA Commissioner must advise borrowers to seek financial advice 
The Commissioner must in all material that provides information about repayment bonuses and that is made available to all borrowers include a statement to the effect that borrowers are advised to seek appropriate financial advice before making excess repayments in order to obtain a 10% bonus. 
Amendment agreed to. 
Clauses 1 to 4 as amended agreed to. 
Bill reported with amendment. 
Report adopted.