Clark David: Student Loan Scheme Amendment Bill — In Committee 
Clark David: Student Loan Scheme Amendment Bill — In Committee 
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Dr DAVID CLARK (Labour—Dunedin North) 
: 
 I rise to take a call in the Committee stage of the Student Loan Scheme Amendment Bill. Labour supports efforts of course to make the student loan scheme more efficient and to improve repayment rates. The Hon Peter Dunne has talked about a pragmatic approach to this. We believe that there is a pragmatic approach to this and we want to talk in further detail about the repayment holiday changes that are proposed as they appear in clauses 4(b) and 17 of the bill. We have our own proposed amendment. 
The changes to the scheme must be aligned in our view to the basic principles of fairness and opportunity—principles that National has ignored in dealing with the student loan scheme in our view in respect of this particular aspect. Fairness and opportunity must always be kept in mind in respect of this legislation but we are particularly concerned about clause 17 as I said which slashes the repayment holiday period for overseas borrowers from 3 years to 1 year. That is a significant reduction of 2 years and we are proposing that it be put back to 3 years or indeed to 2 years if that is a more pragmatic solution that can be agreed across the House. The OE is a rite of passage for young Kiwis and it is important that those young Kiwis gather the skills they need to return and be successful in New Zealand. They give back to our country when they return they develop useful contacts and they mature—all things that benefit us as a country in the longer term. Cutting that repayment holiday from 3 years to 1 year places in jeopardy the ability of young New Zealanders to go on an OE and worse it risks forcing them not to come back. 
I think the evidence presented to us in the Finance and Expenditure Committee by the Inland Revenue Department drew attention to the dodgy nature if I can use that colloquial term of the department’s guess about what would happen in terms of repayment. It admitted it was a guess of sorts and that is not good enough. Both Treasury and the Ministry of Education have indicated that in their view this change will in fact increase obligations on people as they will decide to stay overseas. Part of the evidence the Inland Revenue Department presented to us was that it had done a survey through the Kiwi Expat Association the KEA network that suggested most young Kiwis stay overseas on their OE for about 3 to 5 years but also that it takes between 12 and 18 months to secure meaningful employment. 
A lot of Kiwis go overseas and they will work bar jobs they will do what it takes to make ends meet but when they are looking for a professional career or they are looking for the kind of work that they want to be based in long term it takes them a little bit longer to get there. I submit that cutting them off from their OE from their repayment holiday before they have secured that meaningful work will force many of them to stay in those jobs which are not the jobs that they want to contribute to long term. It will cut them short from developing the contacts and other experiences that they need to contribute as much as they can to the New Zealand economy in the years that follow their return. Worst of all it does risk forcing them not to come back. If they then find that their debt mounts because they have not yet secured that most meaningful employment they are more likely not to come back and that is in line with the broad opinion expressed by Treasury and by the Ministry of Education.  
I want to come back to what these student loans are here for. Presumably their purpose is to provide access to tertiary education not to provide barriers. That context is important because the clause in the bill that takes their repayment holiday from 3 years to 1 year is in fact presenting another cost barrier as those costs mount. I had the privilege to work in Treasury a number of years ago on a study that looked at the returns on education and one of the important conclusions of that relates directly to this. It relates to the barriers to access to tertiary education. There are studies overseas and there have been significant studies that show that those from lower socio-economic backgrounds overestimate the costs of education by many more times than those from more privileged backgrounds. I will give the exact numbers—no I do not have them with me but the order of magnitude is about right. Those from wealthier backgrounds overestimate the costs by about three times and underestimate the returns by about 10 times. That is because people do not generally understand the nature of compounding interest. Those from less privileged backgrounds actually overestimate the costs by something like 10 times and they underestimate the returns by something like 30 times so it is a much more significant problem. This has a further implication. When we add this already existing problem of perception of the costs of and barriers to access to tertiary education to the Government’s proposal to reduce the repayment holiday we have one further barrier in the way of those who would undertake tertiary education for their own good for their own betterment for the betterment of the lot of their family and ultimately for the good of our country.  
The project at Treasury covered a number of other things that also bear direct interest to this particular clause. We were asked to spend the $10 billion metaphorically that was attributed to tertiary education at that time as best we could and lay out what that might involve. That involved looking at governance arrangements whether the returns on degrees were better than those on diplomas and whether the institutions we have currently serve us well. What we found theoretically at least was that the returns on a degree are phenomenal for our country. So those people who undertake tertiary study benefit our broader well-being as a country. They bring revenue to our country. They are likely to operate in a way that means they will be good taxpayers in the future. If we present barriers to people getting degrees we are foolish. So those who are from lower socio-economic backgrounds who would find a barrier in the student loan legislation and indeed in taking on a student loan should be encouraged. There is Nobel Prize - winning work on this. They should be encouraged to undertake tertiary research even if that means that the State pays for all of their education not just the loan but for all of their education. 
So this move to reduce the repayment holiday moves in exactly the wrong direction for us as a country. We want to make tertiary education more accessible not less. What this bill does and what Treasury effectively says is that it puts one more barrier in place for people who want to undertake tertiary education. It is working for those who are privileged who will be able to undertake tertiary education anyway but it works against those who perceive a barrier to getting into the tertiary sector. To finish I want to suggest that we should amend clause 4(b) and the enactment clause clause 17 to enable that repayment holiday to stay at 3 years for the good of all of us in our country. Thank you.