Hipkins Chris: Student Loan Scheme Bill — Second Reading In Committee 
Hipkins Chris: Student Loan Scheme Bill — Second Reading In Committee 
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CHRIS HIPKINS (Labour—Rimutaka) 
: 
 I look forward to a full debate on the Student Loan Scheme Bill a bill that Labour is supporting but with reservations. This part deals with the purpose of the bill and I could probably begin my comments there. I will talk primarily in this contribution about the move to an electronic system for administrating student loans but talking in more general terms about the purpose of what this Act—which the bill will become—is designed to do clause 3 states that it is to: “(a) provide for the effective administration of student loans; and (b) provide for the collection of student loan repayments; and (c) provide transparency about student loans so that borrowers understand their obligations for those loans; and (d) encourage borrowers to repay their student loans at the earliest possible time.” Those are all good things and those are all things that Labour supports and agrees with. 
It would be fair to say that the student loan scheme at the moment is radically different from the student loan scheme that was introduced in the early 1990s and one that has been in need of refinement for some time. I have spoken in previous debates on the loan scheme about the difficulties that I personally had as a student loan borrower in making sure that my loan was repaid and that I ended up with a zero balance. Getting accurate information about a student loan balance at any given time can be incredibly difficult. It is probably the most difficult for students who are still studying because in the first year that their loan is drawn down it is administered by Work and Income or StudyLink and then in subsequent years by the Inland Revenue Department. At the end of the year their loan balance is transferred from StudyLink to the Inland Revenue Department which means that if they are in the second third or fourth year of study they effectively have two loans one with the Inland Revenue Department and one with StudyLink. It has always been a challenge for people to get accurate information about their loan balance at any given time. 
What this bill does—and we are definitely in support of this—is allow for real-time transfer of information between those two administrators if you like of the student loan scheme so that at any one point in time students or borrowers will be able to log in and get accurate up-to-date information about their loan balance. That is important. It is useful. It is what we can do with all of our banking now. We can log in and check our bank balances and credit card statements without any difficulty so why we cannot do the same with student loans has I guess been a point of contention. I think that all student loan borrowers will definitely welcome this measure. 
However some pitfalls still need to be worked through. With regard to the calculation of interest payments and interest write-offs the difficulty that I constantly hear about from people is that mistakes are made in interest calculations either on their part or on the part of the Inland Revenue Department and in getting accurate information about exactly how much they need to repay. This generally tends to happen when borrowers get towards the end of the repayment of their student loan. They might get to the point where they have only a few hundred dollars left to pay so they will cancel the salary deductions from their salaries because they know that their salary deductions will potentially be more than the amount that they have to pay. They will go ahead and do that. They will then try to get from the Inland Revenue Department an accurate account of how much they have to pay and they will make that payment. However it can then turn out that they have underpaid or overpaid depending on the interest calculations that were made so they could end up getting a refund or getting a bill asking for more money. 
I hope that at some point in time we can get to a system where for instance if I want to finish paying off my loan and get a zero balance as of today I will know that this is the amount I have to pay or the amount that I am being refunded and that we do not have this process where once borrowers think they have made their final payment they have to wait a long period of time before they get to find out whether the final payment has been made. 
Aaron Gilmore 
: We agree on something Chris. We agree on that. 
CHRIS HIPKINS 
: I am pleased to see that National members agree on that because that has been a nightmare for people. The other thing that has been a nightmare is that the Inland Revenue Department’s administration of the scheme using its paper-based system has a few quirks in it at the moment. I finally got to the zero balance point with my loan after a year. It took a whole year to get from being near the final repayment to actually getting the zero loan balance with a bit of backwards and forwards with the Inland Revenue Department. Then for about 3 years after that every year the Inland Revenue Department sent me a statement saying that I had a zero balance on my student loan because its paper-based system had not quite kept up with the fact that I had actually managed to pay off my loan. That is something that I get from the Inland Revenue Department all the time. I am surprised that it did not add the cost of the postage to my loan balance and then send me a bill for it because ultimately the taxpayer was paying for these loan statements to be sent out to me long after my loan had been repaid. In the move to this new electronic system we are putting in place with this bill I hope that all of that can be avoided that the system will be a lot more efficient and that once someone has repaid his or her loan it will be finished. I think that members on this side of the House will be very supportive of that. 
My colleagues have raised concerns in their second reading speeches about the fee for the establishment of a student loan being increased from $50 to $60 and I certainly concur with them on that. One could ask why we have to increase the amount of money that a borrower will have to pay in order to have a loan in the first place if the student loan scheme is to be more efficiently administrated. Is this a back-door way of increasing the costs to the borrower when the costs to the borrower should actually be decreasing? My argument is that if this bill results in more efficient administration of the loan scheme the savings from that should be passed on to the borrower. To do anything less than that in my view would effectively resemble a broken promise by National. National promised that it would keep interest-free student loans. Of course it made some other promises about making it easier for people to repay their loans faster. If this bill increases the efficiency of the scheme but National does not pass on the benefits of that to borrowers I think that really is a breach of the good faith that many loan borrowers showed towards National by mistakenly voting for it. We can forgive them for that. But in time I think I would like to see those savings passed on. 
We have already seen from this National Government the introduction of an annual fee for student loan borrowers. In my view an annual fee is a form of interest because even if somebody does nothing other than make the minimum repayments required to just keep it ticking over they are now charged an annual fee. In my view that is a form of interest. Labour is definitely opposed to the increase of the establishment fee and we were opposed to the introduction of the annual fee. I will deal more with the repayment provisions in my contribution on the next part of the bill. 
I will return to the purpose of the bill which is around the efficient administration of the student loan scheme and greater transparency around student loans. I think we on this side of the Chamber will certainly welcome that. As I have said before it has been a bit of a black box for loan borrowers trying to figure out exactly how much they owe and trying to get to the bottom of how much they would need to pay if they wanted to repay their loan in full. I think this bill potentially helps that situation quite considerably and we certainly welcome it. 
I could talk a little bit about some of the definitions set out in clause 4 such as the “annual repayment threshold”. It is established as being $19084 a year before the compulsory repayments kick in. That is not an awful lot of money. We have seen under this Government that that figure has not been adjusted in the sense that we might have hoped. It probably would have been under a Labour Government. People on very low incomes of only $19000 a year have to make repayments on their student loans and I think we may want to consider that situation in this current economic climate. I think everybody who borrows knows that they need to make their repayments. 
Amy Adams 
: Are you still talking Chris? Heavens above! Haven’t you finished talking yet? 
CHRIS HIPKINS 
: I say to Amy Adams that we are all earning $130000-plus a year. That might not seem like a lot of money to us in this House but for people earning $19000 a year who are making repayments on a student loan on top of the tax they have to pay—on top of the tax they have to pay—it is a considerable amount of money. 
Amy Adams 
: Talk about the bill. 
CHRIS HIPKINS 
: OK. Clause 4(1) contains the definition of “annual repayment threshold” I say for the member who does not seem to be aware of what is in the bill we are debating. 
Amy Adams 
: What’s the change to it Chris? What’s the change? 
CHRIS HIPKINS 
: I do not know. What has changed? It is in the bill; therefore it can be debated. The excitable Ms Adams I am sure will take the next call to talk about that. What has changed? The threshold has not changed which is the problem because it should have been.