Robertson Grant: Student Loan Scheme Bill — First Reading 
Robertson Grant: Student Loan Scheme Bill — First Reading 
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GRANT ROBERTSON (Labour—Wellington Central) 
: 
 It is a pleasure to rise to speak on the Student Loan Scheme Bill. I will say at the outset that although the Labour Party will be supporting the first reading of the bill and its referral to the Finance and Expenditure Committee we have a couple of particular reservations about it that I will mention. We want to seek from the Minister of Revenue an assurance that as we go through the select committee process we can address what I suspect are unintended consequences or if not unintended consequences ones that hopefully can be mitigated as we go through the process. 
As the Minister has outlined the overriding purpose of the first part of the bill is to improve the administration of the student loan scheme by moving to an electronic format so that it is easier for borrowers to interact and communicate with the Inland Revenue Department about their loan. I know that around the world there are borrowers and former borrowers of student loans who will be celebrating the notion that the student loan scheme can enter the 21st century and be dealt with electronically. I was recently looking at a case concerning a constituent who is having an issue with their student loan repayments. I looked at the forms they were getting from the Inland Revenue Department and I recognised them. In 1996 when I was president of the New Zealand University Students Association I had helped to design those forms at a time well before people were considering Internet banking. The fact that the department is still using those kinds of forms is a sign that they need to be updated and I think we are all pleased that they will be. 
Craig Foss 
: Still cleaning up your mess. 
GRANT ROBERTSON 
: No actually that was Wyatt Creech’s mess; I was just trying to help him at the time. 
It is true that the material that students and borrowers receive is difficult to understand. Anyone who has been a student and borrowed under the scheme or perhaps is a parent of a student who has borrowed will know that it is very difficult to know what balance people have. It is extremely hard to know what payments have been made. Deductions are made at different times of the year. When students believe they have finally paid off their loan many times they have not. They often have a small amount of money owing that ends up attracting an enormous amount of penalty interest that then has to be wound back with huge amounts of paperwork in the process. Certainly on those grounds this bill is a step forward and is something that the Labour Party welcomes as an improvement for the experience of borrowers and future borrowers. 
We also support the idea of aligning the penalty payments as the Minister has just mentioned. Anything that we can do to encourage the repayment of loans by borrowers who are overseas is good. Far too much money borrowed by people who are now living overseas is not being paid back and obviously the incentives that we can put in place to make repayments occur are a good thing. 
Where we have more significant concerns is around the idea of moving from an annual assessment to the pay-period assessment. Although I can certainly understand that this would simplify the process it will have some negative consequences for people who are already borrowers and work or who are currently students who work during the holidays and manage to earn more than $367 a week as many students do during their holidays. They will then have a full and final payment made from their pay during a week period or whatever their pay period is. This surely is not what we want. Students tend to work for long periods in the holidays to save up money so they can use that money when they are at university or polytech. If we are moving into a process whereby they will have to make repayments on the basis of their weekly pay rather than having an annual assessment whereby they possibly would not even reach the $19000 threshold I do not think that is fair. 
I do not think that is the kind of incentive we want to be putting on students in their holiday period. There are far too many examples of students who work very long hours during term time. Their studies suffer they come under more pressure and there are health consequences. If people are able to secure full-time work during the holidays I think they should be able to keep the money that they earn rather than losing some of it in repayments. I do not think that is the intention of the Minister in putting this bill forward. He is attempting to put forward a more simplified way of assessing people’s incomes and making the payments as a result. I do not think it is fair on those people who will be earning $367 a week or slightly more than that perhaps and then not earning over $19000 over the whole year. Under this bill that will be considered as a full and final payment for the weekly or fortnightly pay period. I do not think that is fair and it is an issue that we are particularly concerned about and want to address in this bill. 
I note that this concern has been raised in the regulatory impact statement. In fact the Ministry of Social Development has raised the concern that removing the end-of-year square-up and moving to the pay-period basis may increase cash flow difficulties for some. It may make the scheme more affordable for others but it may increase pressure on the Ministry of Social Development for financial assistance. I think we need to be very careful about going down this pathway. The regulatory impact statement offers a couple of options for Ministers and I am sure that these can be explored during the select committee process. In particular there is the idea of whether the repayment obligations should fall on students. I think it is a very important thing because Labour spent a lot of time when in Government on removing the interest on loans while studying then removing interest totally. To start moving back to a position where people are still studying and having to repay some of their loans starts to wind back a system that we were trying to make more fair. I think by doing that we will go down a path that is taking us backwards and I do not believe that is at all fair. The Labour Party opposes that particular provision as it stands. 
We think there is another option which is the possibility of ring-fencing holiday work—specifically saying in the law that holiday work would be ring-fenced so that the particular anomaly I just mentioned could be kept out. We would like to discuss those matters with the Minister when we get to the select committee process. I acknowledge that the process of simplifying and improving the administration and moving to an electronic format is a good thing but not if it is at the expense of some people being out of pocket. People who work during the holidays will feel that they are losing some of their income and therefore will have to work more during term time or indeed have some form of financial hardship during term time. 
On an administrative level this scheme does some good things but it is worth setting the context of this bill for the other changes that are happening in the student loan scheme. The Minister himself when he introduced the bill said it was one of the major changes that had taken place in the student loan scheme since 1992. Perhaps if one was very focused on administrative matters one might believe that. Some of the other things that are happening to student loans at the moment are far far more significant. The Minister for Tertiary Education Steven Joyce has mentioned that he is quite pleased that some of the changes to the student loan scheme will dampen demand for tertiary education. I have to say that that is one of the most outrageous things I have heard from a Minister for Tertiary Education for a long time. The Minister for Tertiary Education feels that it is his job to dampen demand. Stopping people going into tertiary education is what that actually means. The Minister’s priority is to stop people getting into tertiary education. 
The first specific change to the student loan scheme that I want to mention in that regard is the notion that students must pass half of their course over a 2-year period in order to retain eligibility for a student loan. We all want students to work hard but what the Government has done is bring in a provision that is retrospective. If one is to be eligible for a loan in 2011 one will be judged on one’s grades in 2009 and 2010—2009 a year before anyone knew that these would be the rules. That is demonstrably unfair. I have been approached by the chief executive of a tertiary institution who gave me a specific example of a student who went to university. In their first year they should not have been there; they struggled and failed everything. That student is now doing reasonably well at a polytechnic this year but if they fail one paper one course they will have no loan eligibility for 2011. That is demonstrably unfair and needs to be changed by this Government. 
There are also unforeseen consequences of another change which is the 7-year limit on student loan borrowing. 
Carmel Sepuloni 
: How long did it take Steven Joyce? 
GRANT ROBERTSON 
: Well funnily enough it took Steven Joyce about 7 years. That is an interesting choice of year is it not? By putting the 7-year limit in place that means that if someone does an undergraduate degree perhaps in science and goes on to do medicine towards the end of their medical qualification they will have no eligibility for student loans. 
Moana Mackey 
: That’s happening in Gisborne. 
GRANT ROBERTSON 
: That is right. Moana Mackey has a constituent in Gisborne whom this has happened to. That is a perverse outcome. Those sorts of changes to the student loan scheme are not positive for the future of New Zealand. 
We need to be investing in tertiary education and getting people into tertiary education rather than as Minister Joyce has as his priority dampening demand for tertiary education. The student loan scheme nowadays is part of making sure that people can stay in tertiary education. It is part of people’s ability to participate in New Zealand society in the future. We need to continue to invest in students to make sure that they can afford to be there and to invest in overall tertiary education. Although this bill does some useful administrative things it is putting in place some potentially dangerous and difficult changes for borrowers.