Walker Holly: Student Loan Scheme Amendment Bill (No 2) — Second Reading 
Text is incorporated into the Bound Volume 
Walker Holly: Student Loan Scheme Amendment Bill (No 2) — Second Reading 
[Sitting date: 28 February 2013. Volume:687;Page:8345. Text is incorporated into the Bound Volume.] 
HOLLY WALKER (Green) 
: 
 The Green Party will continue to oppose this Student Loan Scheme Amendment Bill (No 2) as we did at the first reading. In our view this bill is part of a gradual process of tinkering with the student loan scheme through a series of amendments all of which are slowly eroding any good things about the student loan scheme and locking us into a more punitive individualised model of tertiary education. Although the provisions in any one of these amendment bills alone might seem minor and technical when they are taken together we are seeing a very damaging trend in the way we approach and administer student loans—one that is likely to be harmful to students and graduates and likely to disincentivise both tertiary study and graduates to stay in New Zealand and contribute after they have completed their studies. 
In a timely intervention to this debate the Parliamentary Library this week produced a research paper on the student loan scheme which has now been in operation for 20 years. The Ministry of Education also recently produced a paper summarising changes to the student loan scheme between 1993 and 2011. I thought it might be useful to the House to hear some of the facts presented within these papers including some of the incremental changes that have been introduced by this Government which are slowly eroding the fairness of the scheme. I might start—because I would like to address a straw man argument put up by one of the earlier speakers Todd McClay—with the write-down rate that the Government receives for the student loan scheme. He said that it has had this great policy of bringing it down from 48c in the dollar to 40c and it actually managed to get it down to 39c in the last 3 years. But of course what he neglected to tell the House was that when National came into Government it was at 40c in the dollar. It increased under National’s watch and all it has managed to do is bring it back down to what it was when it came into office. 
More fundamentally I want to run through some of the incremental changes that this Government has made to the student loan scheme that have eroded the fairness of that scheme. These include first of all introducing a lifetime limit of 7 years of equivalent full-time studies—or roughly 7 years—of borrowing per student under the student loan scheme so that a student who has completed a 4-year Bachelor’s degree with honours and a 2-year Master’s degree and has started a 3-year PhD would lose access to their student loan funding part-way through their doctoral study. 
The Government also reintroduced the academic requirement that a borrower has to have passed at least half of their previous 2 years of study in order to continue to qualify for a student loan. That is a manifestly unfair measure that was abolished way back in 1993 but was reintroduced by this Government. 
The Government has restricted access so that students over 55 can no longer borrow under the student loan scheme as we heard from the previous speaker Megan Woods. This is nonsensically making it more difficult for older people to upskill and retrain during a period of global economic recession. The Government has also made it more difficult for new immigrants to qualify for the student loan scheme. 
David Bennett 
: Rubbish! 
HOLLY WALKER 
: It is true. It is true. 
David Bennett 
: How? 
HOLLY WALKER 
: You restricted the children of permanent residents from being able to borrow under the student loan scheme. [ 
Interruption 
] It is true you did it. Your Government did that. 
David Bennett 
: Oh that is rubbish. 
HOLLY WALKER 
: It is not rubbish. You look it up. The Government also restricted part-time students from being able to borrow for course-related costs which is something that was also referred to by the previous speaker. Again that is making it very difficult for people to upskill and retrain. 
It increased the administration fee on the student loan scheme from $50 to $60 per year and introduced an annual Inland Revenue Department administration fee of $40 for graduates paying off their loan. It reduced the 3-year repayment holiday for graduates overseas to just 1 year. It abolished the 10 percent voluntary repayment bonus and it increased the automatic student loan repayment rate from 10c to 12c in the dollar. 
In short this is a series of amendments that restricts access to student loans makes it harder for key parts of the population to upskill and retrain increases the cost of the scheme disincentivises graduates to repay their loans faster increases the likelihood of overseas borrowers defaulting on their student loans and hits graduates harder in their back pocket as soon as they graduate by forcing them to pay back 12 percent of their income on their student loan even if they earn less than the full-time equivalent of the minimum wage. 
Meanwhile the nominal value of the student loan debt reached $12 billion in 2012 and as we have heard we have cut student allowances for postgraduate students forcing them to borrow under this scheme and increase their total student debt to pay for their living costs or as many have done to drop out of their courses. All in all this is not a particularly rosy picture. So within that context we have this Student Loan Scheme Amendment Bill (No 2) which gives effect to yet more of the Government’s punitive tinkering with the student loan scheme that it announced in Budget 2012. 
As we have heard the bill essentially makes two changes. Firstly it aligns the definition of “income” for student loan purposes with that used for Working for Families and it makes it easier for customs officials to share information with the Inland Revenue Department to track down borrowers who are overseas and make them repay their loans. On the first point the Green Party’s major objection to the alignment of “income” is that this is a missed opportunity to correct an unfair element of the definition of income for student loan purposes. This was highlighted last year when the Government introduced changes to increase the student loan repayment rate. 
 Just to explain why that is because Working for Families entitlements are currently calculated on net income before student loan repayments are taken into account or deducted increasing the student loan repayment rate as was done in the Budget has had a real detrimental effect on the weekly budgets of many families because the higher student loan repayment rate is not taken into account when their Working for Families entitlements are calculated. So basically this means that the higher student loan repayment rate operates as a tax increase for those families but with no corresponding increase in their Working for Families entitlements. The net result is bad for the weekly budget of those families and bad for their back pockets and many of these families have young children. 
A previous speaker Mr McClay talked a lot about hard-working taxpayers and New Zealand mums and dads who resent the fact that students and graduates borrow and have to pay back. Well I will tell you what: I am 30 years old and I have a student loan debt and so do just about all the mum and dad New Zealanders whom I know who have young children. They are taxpayers. They are also graduates with student loans. They are paying it back and it is slowing them down from being able to qualify to buy a house to start their lives and to have children. Those mum and dad New Zealanders all have student loans in this day and age. They did not get a free tertiary education like those guys over there. 
Although this bill aligns the definition of income for student loan purposes with the definition under Working for Families we need a corresponding change that means that Working for Families entitlements get calculated after student loan repayments have been taken into account. Until that happens the Green Party cannot support the changes in this bill. 
Secondly on the matter of information sharing between the Customs Service and the Inland Revenue Department to chase up overseas borrowers we have a real problem with such a policy being pursued in the context of the reduction of the repayment holiday for overseas borrowers from 3 years to 1 year that has already taken place. Although we have no problem per se with measures designed to encourage overseas borrowers to keep up with their student loan repayments we cannot support punitive measures to track them down at the border unless we have a corresponding enabling provision that recognises the importance of spending some time overseas and the experience and skills that doing that gives to an individual and the fact that many New Zealanders do so when they take their OE. These gains have been very well documented and what we do not want to do is discourage people from returning to New Zealand when they have spent time living overseas. 
That is why the repayment holiday was such a good idea when it was 3 years. It allowed individuals to spend time overseas for a period in which they were not required to meet their student loan repayments and they did not rack up penalties and fines that might put them off returning to New Zealand. Introducing this information-sharing provision means that there is a much greater chance of them being pinged with huge penalties and extra debt when they return. That in turn means that there is a very real risk that those borrowers will decide not to return to New Zealand. At a time when more New Zealanders are moving overseas than ever before it is vital that we design policy that maximises the incentive for young New Zealanders to stay in the country and contribute to our economy and society and this bill does the opposite of that. 
Finally if I might turn the House’s attention to the transitional provisions introduced in this bill by the Finance and Expenditure Committee to enable the Inland Revenue Department to administer the changes. What we heard at the committee is that as a result of the large number of small but complicated technical changes made to the student loan scheme over the years the department’s computer systems are now struggling to keep up and administer the scheme. It is the same problem we were talking about in the House yesterday with regard to the department’s ability to administer the new child support formula. Here clearly is an IT system that is in urgent need of an upgrade. It is groaning under the weight of a student loan scheme that has been tampered with so much over the years that it cannot cope any more and the Government’s answer is to give wide-ranging regulation-making powers by Order in Council to enable this scheme to be fixed up progressively over time. It is neither fair nor transparent and it is consistent with a theme we have seen from this Government of giving these kinds of wide-ranging regulatory powers—