Peachey Allan: Student Loan Scheme (Repayment Bonus) Amendment Bill — Second Reading 
Peachey Allan: Student Loan Scheme (Repayment Bonus) Amendment Bill — Second Reading 
[Volume:657;Page:6307] 
ALLAN PEACHEY (National—Tamaki) 
: 
 I appreciate the opportunity to lead off the National Party’s contribution to the Student Loan Scheme (Repayment Bonus) Amendment Bill debate. I thank the deputy chairman of the Education and Science Committee and Labour speaker who just preceded me Mr Mallard for his kind comments. I think it is fair to say that members of the select committee get on pretty well and are pretty committed to doing what is best for in this case New Zealand’s young people. I certainly appreciate the assistance that Mr Mallard and his side gave as the committee worked through the bill. It was a relatively straightforward bill. We received three submissions and two of them were in person. We made four relatively minor amendments which as the Minister of Revenue said were aimed at tidying-up a few things. Once the bill is passed hopefully the Act will work that little bit better. I also acknowledge the assistance we had from officials from Treasury and from the Ministry of Education. One of the reasons that the process went so well was the quality of their advice and the work that they were doing. I would like to put on record the committee’s appreciation of that contribution. 
The Student Loan Scheme (Repayment Bonus) Amendment Bill amends the Student Loan Scheme Act 1992. In essence it provides a bonus of 10 percent for any extra payment or payments of $500 or more made in a tax year. I listened with interest to Mr Mallard’s comments and they have a compelling logic to them. However two points need to be made. The first one is a key to financial success in New Zealand and that is to clear one’s debts as quickly as one possibly can. People should do that whether it is a student loan or a mortgage. Clearing debts is a key to financial success. I would not be comfortable with any suggestion even if there were a bit of economic logic to it of youngsters delaying the repayment of their loan. 
There is another point to this bill as well. We are talking about taxpayers’ money. It is money freely lent to students by taxpayers to fund their education. It seems to me that the taxpayers’ purpose in making that money available is to enable students to get an education not to make financial gains through the banking system or the money markets or that sort of thing. Maybe we need to give a little bit more reflection to that issue because at the end of the day it is taxpayers’ money. Some of that money is paid by families who do not get close to having their children go through tertiary education. I think we need to show a little bit of respect for that. 
The amendment bill has two aims. I want to concentrate for a few minutes on the first one. It is to encourage borrowers to repay more than the compulsory minimum amount so that they can pay off their loans sooner. I reiterate a point I have already made: I do not think it is the business of this House to be trying to persuade or influence young people to delay paying off their debts in order to earn a bit of interest in the banks or have a flutter on the financial markets. The bonus scheme is expected to reduce the repayment times of borrowers who take up the offer by about 1.5 years. That is a significant length of time and certainly there are long-term financial gains for people with loans who are able to take advantage of this scheme and pay off their loans more quickly. They are not just financial gained loans or an increase in disposal income but the opportunity to marry have children purchase a home and travel overseas. People have much greater freedom and flexibility to do the things they want to do when they have paid off their debts. That gain of nearly a year and a half is one worth taking. 
This bill is an incentive to people to repay their loans more quickly. That is all it is. It is estimated that the amount owing on student loans will be about $15 billion by 2014. That is a lot of money. It is a significant burden on New Zealand taxpayers and I am not sure that speakers who have gone before me have sufficiently emphasised although the Minister of Revenue mentioned it the impact of making student loans interest-free on 1 April 2006. That $15 billion comes from taxpayers. Many of us are of the view that taxation is far too high anyway and that it deprives people of the opportunity to take responsibility and make progress in their standard of living. I think we need to bear that in mind and as I have said before show some respect for the reasons why the taxpayer makes loans available. It is to enable people to get an education. It is not to enable them to enhance their income on the financial markets or through bank deposits. 
Since student loans became interest-free on 1 April 2006 there has been a downward trend in student loan repayments. I am sure that was not the intention of the Labour Government at the time but that is what has happened. If one comes from the position that I do—that it is better to clear one’s debt as soon as one possibly can—it is not a good consequence of making student loans interest-free. I suspect that it is probably an unintended consequence as so often happens. The downward trend in student loan repayments by borrowers and in the number of people fully repaying their loans early is something we need to be concerned about. I do not believe that it is good for students or borrowers and I certainly do not believe it is in the interests of the taxpayer. 
That leads me to the second aim of the bill. Some would say that it is a secondary aim but I think it is a very very important one. It is to reduce the cost of the student loan scheme to the Government and therefore and most important to the taxpayer. 
Hon Trevor Mallard 
: Will the member answer a question? If it is reduced to the Government who is paying the extra? 
ALLAN PEACHEY 
: I am sorry; I do not follow the question. 
Hon Trevor Mallard 
: If the cost to the Government is reduced who is paying the difference? 
ALLAN PEACHEY 
: If the cost to the Government is being reduced then the taxpayer is benefiting from that and the taxpayer does not have to dig so deep into his or her pockets to fund the scheme. Let us be really clear about this. We are talking about money advanced by the taxpayer. It is money that is not available to the Government to do other things with for example like tax cuts. Therefore it is in the interests of borrowers the taxpayer and the Government to encourage the repayment of those loans. 
This is a relatively short bill. It is simple in its operation. If one owes $1100 and pays off $1000 the remaining $100 is wiped off that person’s loan at the end of the financial year. It is a very very strong message to borrowers that the Government wants them to pay back their loan more quickly both for their own interests and in the interests of the taxpayer. Thank you Mr Assistant Speaker.