Means-test interest rates on student loans

Means-test interest rates on student loans

Universities New Zealand notes that the return on investment on student loans is extraordinarily high. Contrary to urban myth, even plain BA and BSc graduates earn many hundreds of thousands more in lifetime earnings than non-graduates. So we are giving interest free student loans to many people who don’t need them. This means (1) that our universities are cash-strapped with much lower per student funding that in Australia and (2) that the amount we can afford to let students borrow doesn’t actually cover the cost of living and studying, so many poor New Zealanders are effectively locked out of the benefits of tertiary education. This is harmful economically and potentially socially (note that low level of tertiary education was one of the best predictors for people voting for Trump and for Brexit). Solution: graduates should pay interest that is proportional to their incomes - market rates for those on above average incomes; reserve bank cash rate for those on on lower incomes and no interest for those earning less that half the average income.

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    • Dennis Ingram
      commented 2016-12-03 18:15:31 +1300
      Education should be as cheap as easy to obtain as possible. Turning dumb people into smart people is perhaps the most useful thing our government can do for us.
    • Dennis Ingram
      tagged this with dislike 2016-12-03 18:15:30 +1300
    • James Maclaurin
      commented 2016-11-28 09:53:10 +1300
      “If the students do well then they will pay more income tax” — most taxes are progressive so it’s not a very radical idea to suggest that if you do well you should pay more. I thoroughly agree that free tertiary education would be great, but it’s a very large cost ($9.7 billion in NZ in 2013/14) and I think it would be hard to convince voters that we should suddenly make it free. Not everyone gets or wants tertairy training so those that don’t might well feel that free tertiary education was effectively a tax on them from which they were receiving no benefit.

      What I hope is that TOP will push NZ in the direction of a Universal Basic Income. This would remove the need for a cost of living component to student loans.
    • duncan cairncross
      commented 2016-11-27 16:34:08 +1300
      This is a bloody silly idea – we should do what Germany does and have no fees and state subsidized student grants
      Student loans are a horrible horrible idea

      If the students do well then they will pay more income tax
    • duncan cairncross
      tagged this with dislike 2016-11-27 16:34:08 +1300
    • Tim O’Donnell
      tagged this with dislike 2016-11-26 18:42:02 +1300
    • James Maclaurin
      commented 2016-11-26 17:09:51 +1300
      Responding to Graeme Kiyoto-Ward — We don’t get a better education if we’re wasting lots of vote education on interest free student loans when we should be paying it to to enhance research and teaching. The current system has a very significant barrier because it doesn’t cover the actual cost of living and studying. Only middle-class people need apply. Means-testing interest rates on student loans would give us the money to enhance student loans, allowing more people to study.
    • Ben Mayson
      tagged this with important 2016-11-26 15:35:29 +1300
    • Graeme Kiyoto-Ward
      commented 2016-11-26 14:04:49 +1300
      Our economy benefits from having a better educated population. I disagree with anything that adds any barriers to educating New Zealanders.
    • Graeme Kiyoto-Ward
      tagged this with dislike 2016-11-26 14:04:47 +1300
    • James Maclaurin
      published this page in Suggestions 2016-11-26 13:53:44 +1300