Hughes Gareth: Student Loan Scheme Bill — Second Reading In Committee 
Hughes Gareth: Student Loan Scheme Bill — Second Reading In Committee 
[Volume:675;Page:20700] 
GARETH HUGHES (Green) 
: 
 Kia ora Mr Assistant Speaker Robertson. Nga mihi nui ki a koutou. Kia ora. It is great to take a call on the Student Loan Scheme Bill—a Government bill going through under urgency. I think student loan issues are urgent and we should be dealing with them but a bill of this nature which essentially is tinkering around the edges is not the type of thing we should be addressing under urgency. 
When we look at the student loan burden across the country we are looking at an amount in excess of $11 billion on the shoulders of more than 560000 Kiwis. This is an urgent crisis and this bill does not address it. My big fear is that this bill will prolong the student loan debt burden on those hundreds of thousands of Kiwis for months and years with only minuscule benefit. 
Student loans since they were first introduced in 1992 have been a massive experiment with our tertiary education sector graduates. A massive $11 billion is currently outstanding and this loan debt is growing at $1 billion a year—a fantastically huge sum at a time when the Government is borrowing such considerable amounts. 
The curious nature of student loans is that in fact they are down on the Government books as an asset. If we look at the Government books which are not in great shape at the moment we wonder what the consequences would be if we took this asset and did something else with it. What it is of course is a massive drag on our economy students and society. 
I acknowledge and thank the submitters to the Finance and Expenditure Committee. I thank the officials and the chair of the select committee. We did not hear a huge number of submissions on this bill because ultimately this bill is pretty small-scale in its intent. Essentially this bill tightens up rules relating to overseas graduates with loans adds administration fees and most critically brings in electronic management of student loans. I cannot believe that in 2011 we are getting around to electronic management of loans. It is amazing that in 2011 we are finally getting to this. It could have been done a long long time ago. 
Peseta Sam Lotu-Iiga 
: Under the Labour Government—yes that’s right. 
GARETH HUGHES 
: The member is correct. A good question to ask Labour members is why this was not progressed sooner in the 9 years Labour was in Government. It makes common sense. Graduates— 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: I say to the member on my left and the member on my right that interjections are permitted only when they are directed at the person who is addressing the House. Interjections between each other with members having their own private debate are not in order. 
GARETH HUGHES 
: It is a good example of how students have been failed by both Governments of different hues. The fact is that it is good we are finally getting around to electronic management of student loans. It is amazing that we have waited until 2011 given that the internet has been around for such a long time is such a key tool and will increase the cost-effectiveness and efficiencies of student loan administration by the Government. 
We oppose some parts of the bill and support other parts of the bill. We support the intent of the legislation which is to increase the effectiveness reduce administration costs and in particular introduce electronic management but we are opposed to the imposition of additional fees on students. These are Kiwis in New Zealand. Some of the poorest Kiwis are on student loans; they are effectively beneficiaries. These people are the least able to handle additional fee costs being imposed on them especially in this current economic environment. 
This bill brings in a $60 student loan establishment fee and an annual $40 student loan administration fee. These are substantial figures for people. It might not seem like much to members in this Chamber who have just received a 5 percent tax cut—a tax cut for the rich as it has been called in the public arena. Yet we see this Government putting additional burdens on some of the poorest New Zealanders who are facing rises in GST petrol and other costs of living. We think this bill is bad in that respect. It would have been good to get rid of this part in the select committee. Ultimately we heard from officials that the Inland Revenue Department is investing in updated computer software and infrastructure. So there is no need for additional costs for students to pay. I understand that the administration fees will raise only around $14 million. That is a tiny drop in the bucket compared with what this Government is spending on motorways which is in excess of $19 billion. 
We are opposed to administration fees for students because they add to the burden that students are already struggling under; they add to the repayment time increasing that burden over the course of graduates’ student loan repayment; and lastly they reduce the effectiveness of the voluntary repayment bonus. We think the repayment bonus is a good thing. We think we should be looking for more carrots as opposed to sticks. We support voluntary repayment bonuses. In fact we support writing off a year’s student loan debt for each year the graduates stay in New Zealand. We want to see Kiwis staying in New Zealand especially after they have graduated. We think that carrots are a much better way forward instead of looking at the path of debt collectors or of charging extra fees on the loans. 
Before I get into the substance of the bill and the reasons why we are opposed to the admin fees I make just a quick point that it is good that this bill does not introduce interest on student loans. I am sure the Government benches are looking forward to that announcement if it comes. I hope the National Party does not announce bringing back interest on student loans. It was a shame we had interest on student loans under a Labour Government for so many years and I feel that it should have reduced the interest earlier. Labour waited until 2006. Obviously the issue won the election for them. It was a vastly popular issue. A huge proportion of this country—around one-sixth or 560000 Kiwis—has a student loan. Not having interest on loans has made a significant difference to the burden facing Kiwi graduates. I acknowledge that Labour introduced it and it is good that this bill does not take it away. But I want to hear confirmation from the Government benches that National will not be bringing back interest on student loans. 
The $60 and $40 fees add to the student debt burden. It is not the way we should be going forward. We should be debating how we can decrease student fees and decrease the student loan burden. My big fear is that because interest-free student loans are so popular in this country the Government is trying to apply interest by stealth. The big fear is that these admin fees are interest by stealth. I am sure the Government benches dearly want to bring back interest on student loans. The accusation we heard in the select committee was that the administration fees are interest by stealth. 
The fact is that we already have a good system with a repayment threshold. Once a graduate with a loan starts earning over the threshold 10 percent of their salary is docked automatically to go to the Inland Revenue Department. I imagine I am probably the only member in this Chamber with 10 percent of their salary going directly to the Inland Revenue Department as I slowly but surely pay off my student loan burden. The fact is that we have this system already. The submission by the New Zealand Union of Students’ Associations called this a new tax and said quite rightly that those 560000 students in the community who are worried about taxes and about hearing the tax rhetoric from this Government will be lumped with these new fees and will see them as a tax. 
The fees will increase the repayment time for student loans. If we look at the last student loan report we see that the median repayment time is 6.6 years for someone who graduated in 2004. That is an awfully long time especially for many of these students who are in their early or late 20s and who are thinking about starting a family. This is part of the reason we are seeing such a big demographic shift over the course of the history of the student loan scheme since 1992. People are delaying having families and buying a home—that is if they can live the dream and actually afford a home. With the repayment times we are seeing a gender imbalance. We see females taking longer than males to pay off their student loans. 
We also see this bill reducing the effectiveness of the voluntary repayment bonus. We think that carrots are a good idea as opposed to sticks. We support the voluntary repayment bonus. If a graduate makes a voluntary $500 repayment on their loan they get a $50 bonus from the Government but the fact is that $40 has already gone straight to the Government in these new administration fees—this interest by stealth or as they were described in the select committee these tax increases for the poor. Ultimately the bill will reduce the effectiveness of the voluntary repayment bonus because people will say: “Why bother? I already have to pay these new admin fees. I am just not going to do it.” 
The second part of the bill which I may talk on in other calls is about the pay period. We have some concerns around the changes to the pay period. The changes will disadvantage those hard-working part-time students who earn the bulk of their income over the summer picking fruit working in the freezing works or whatever. The fact is that exemptions are available for those students but I doubt that many students will be either aware of the exemptions or able to access them. There will probably be a lengthy process. It would be good to hear from the Minister of Revenue how once this legislation passes we can make it easier for these students to access these exemptions. 
In summary we support elements of the bill and we oppose other elements of the bill. Ultimately we need a big discussion of what student loans mean in the future and of how we can reduce the student loan debt burden for students. Kia ora.