31 January 2008
NEWS: National offers bonus to student loan borrowers
National Party Leader John Key today announced a plan to help student loan holders get out of debt quicker.
The plan agreed to by the National Party caucus is aimed at encouraging people to make voluntary payments on their student loans – and therefore pay off their loan balances sooner – through an incentive.
"We will keep interest-free student loans for tertiary students. Half a million New Zealanders have a student loan. Many have made long-term financial decisions on the basis of the current policy and we want to ensure they can plan with certainty," Mr Key says.
"One of our concerns has been that the scheme offers no incentive for New Zealanders to repay any earlier. That means loan holders are likely to have their debt for longer, which has implications for other areas of their lives like buying a house or starting a family.
"When the interest-free student loan scheme was introduced, National said the scheme would encourage more students to take on debt and discourage them from repaying sooner. Official figures show this has turned out to be the case.
"The plan I'm announcing today is that the Government will offer a 10% bonus on a loan balance for voluntary lump-sum payments of $500 or more. The incentive would apply in the 10 years following the start of repayments by the borrower.
"For example, if a borrower pays $800 off their loan in a lump sum above and beyond the compulsory requirement, the Government would take $880 off their loan balance.
"What I've announced today is aimed at helping borrowers get out of debt sooner, and give them certainty so they can plan. National has no intention of doing anything that impedes people from realizing their own educational ambitions.
"The policy is also aimed at helping enhance New Zealand's overall performance. Education is a hugely important part of our pathway forward."Tweet
This is a fantastic idea. The two major causes of angst in the student loan system are: 1. Students in the courses most useful to the country come out with the most debt, while students in the courses least useful to the country, such as cat homeopathy, come out with little debt. Because our economy cannot employ the useful people such as scientists and engineers, because Labour has squandered the opportunity to turn us into a smart economy, they must go overseas to pay of their debt at the same rate as their peers. Many never come back. 2. There are far too many “targeted assistance” programs based on things other than merit. All too often people who have never had any interest in academic work are getting paid to go to university - solo parents, long term unemployed, sporting scholarships, ethnic and gender targeting etc. This is completely non-transparent and so students and the public only find out about them when the media gets hold of a story or when they are sitting next to them in class. What else to do: 1. Since universities are now a vocational training institutes, the days are gone when people should get subsidised to do the course of their choice, but should get subsidised, ON INDEPENDTLY ASSESSED MERIT ONLY to enter training that the country needs. 2. Students in the most useful courses should get proportionately more subsidy (ON MERIT) than those in less important courses. In this way we can show that we are proud of and treasure our best people and they are more likely to return the favour many fold by supporting New Zealand whether by coming back here and working or running NZ focused business offshore. 3. All targeted assistance programs, if we must have them should be advertised transparently, publically reported so that the public is happy with them, be contingent on good social behaviour of the receiver and their children, and be phased out wherever possible so that everyone must accept the same level of indebtedness. This would result in better social outcomes, a better sense of achievement and better choices of careers that will eventually lead to better employment and a better match between supply and demand in the workforce.
I tried to payback my loan and get my 10% - but IRD said oh no its not the outstanding amount that you get the discount on its the amount that would be outstanding at the end of the financial year. So although I want to pay my loan off early the incentive is not there as the entire years repayments is taken out before I get my discount!!!! So the incentive is a much watered down version of what is portrayed Mr Key - was that your intention?
I think this is a good idea bearing in mind that a lump sum for some one with a student loan should start at $100 up not a bench mark $500 as that is not a realistic figure for a lot of people to save, if you want higher figures like that then perhaps a scale for "bonus" money of your loan.
fantastic idea! as a student this would certainly encourage me to pay back my loan quicker. Who said National doesnt have any policy. Goodbye labour bring on National 2008 and beyond.
Thanks National! After shafting the lives of many an individual who were students in the 1990s under National administrations you decide now to help borrowers pay their loans back - primarily the generation who did not face interest charges whilst studying or working anyway. In terms of equitable behavior will you therefore be giving refunds to the many thousands of former students whom have paid their loans off through cutting back on spending to get rid of the beast, delaying important decisions such as buying a house or having children? This smacks of hypocrisy but guess that is to be expected from a party desperate to be in power.
Relating to the message above there is a cluster of people who started tertiary education between 1993/1994 and 2000 who: - Had never had any student allowance support - Paid interest on their loans from day 1 (incl. while studying) - having paid large amounts of interest over many years still owe money on their loan Many people in this group have also been frozen out of home ownership etc because of they had only begun working and starting to save at the time of rapid inflation of house prices during 2002-now. If National limit their plan to people in the first 10 years after beginning loan re-payments this very same group is going to be screwed all over again...Nice one.
i think the idea is good, and will cut back student debt a lot more quickly, but do you really think $50 is much (if you pay $500) when you're trying to get through a $20 000 debt? while im certainly not complaining, i dont think this would particuclarly give me a driving initiative to pay off my student loan. something i definately would go for, is a subsidy off your loan, based on your marks, which is kind of like a step in the whole "free education" that NZ likes to preach. another thing is that, although im not studying in any medical areas or anything, the people who are rack up a massive student loan, only to spend their life trying to work it off, as if what they're doing is not exhausting and demanding as it is. and as if we have no shortage of these kind of people at all. maybe if we set up better financial support for people wanting to study in this area (again, maybe based on their marks), we wouldn't get all the good people geting put off this career, and we wouldn't have all these dodgy docters that we're forced to employ beacuse of the lack of medical professionals (im very obviously not putting all medical professional into this category, please font assume that i am). just a thought...
I was infuriated to discover that Mr Key’s proposed 10% bonus on voluntary repayments is limited to loan holders eligible for interest-free loans (i.e. those living in New Zealand). I can understand that National felt they had no choice but to carry on with Labour's "interest-free whilst in NZ" policy on student loans, but this doesn't explain why they should favour those individuals. As well as a question of fairness, there are two other compelling reasons why National should offer this bonus to overseas loan holders: 1) These are the people who, ladden with debt, leave their homeland in search of acceptable remuneration in their chosen professions. Lawyers, bankers, accountants, scientists – high potential income earners, responsible people who want to rid themselves of the noose of debt. These people are both more likely and more ABLE to pay off their loans. 2) These are precisely the people that Mr Key wants to attract back to New Zealand to add value to the economy. By excluding us from policies that show you understand why we left NZ in the first place, you're alienating us further and increasing the likelihood that we’ll think "stuff Aoteaora". As well as robbing NZ of some of its most talented people, this has an additional negative effect on National's goal of reducing student debt, as people will simply choose to forget about NZ and their loans! Enough moaning though, time for solutions. If National's goal is truly to get the student debt paid back faster, I think Mr Key needs to carefully consider the psychology of the new graduate/loan holder. In their first few years of work post-study, graduates - should they even be lucky enough to find employment in the field that they studied - are paid a dismal salary (in relation to their years of investment) that barely allows them to live adequately let alone save. Many are moving to more expensive cities to find suitable employment, and many more leave the country in order to find jobs that allow them to earn a decent income and have a remote shot of getting out of debt in their lifetime. It is to these people, at this time, that the government should be showing its support and empathy. These are the people who made it through university, who bothered to graduate; these are the business people, the bright sparks, investors, leaders of future New Zealand. I propose that during the first 3 years post-graduation, National introduce an”interest amnesty" for all graduates. Continue to ask for nominal mandatory payments (commensurate with earnings) but waive the interest that breaks the back of graduates before they even start. It is interest that crushes graduates’ spirit, which makes them bury their loan statements in denial. These people don’t earn enough to make additional payments – why would they care a jot about an extra 10% contribution by a government who obviously doesn’t care about them, or understand their situation? Secondly, much has been written about the “brain drain” and Labour has tried to address this issue with its ridiculous policy of no interest on loans if you live in New Zealand. Unfortunately they too have missed the point: a lack of interest is not going to convince someone to stay in NZ if the salary they can earn is so mediocre that they can’t afford to make nominal payments anyway! This policy does nothing to incentivise people to pay back their loan sooner; it just indicates (again) that the government understands nothing about the plight of the debt-ridden graduate trying to make his/her way in this world. I propose that you offer the 10% bonus on voluntary payments across all loan holders. Why? Well, for one you’ll gain the support of those critical earners off-shore - most of whom dream of returning to NZ one day. This has the double rewards of helping them pay debt off faster, and of encouraging them home again. Bottomline: overseas loan-holders should not be treated like pariahs. John Key himself left NZ to pursue a lucrative career in banking, so surely you he can empathise. Labour has punished us for leaving with high interest, minimum mandatory payments, and loan statements that Einstein couldn’t decipher! Those earning overseas should not be penalised simply because they’re trying to earn more in order to pay it off faster!! I am a 31 year old New Zealander living in the UK, and working my butt off. I've been here nearly 4 years now, and I'd like nothing more than to return home, however I am still (4 years later!) trying to pay off my student loan. Forget saving for a house, I can't even consider this prospect. At a time when I would like to think about having a family, I'm still saddled with dept and have no choice but to continue slogging away at work to service my student loan. Forget my sob story as an individual: this is the plight of so many New Zealanders now. So you can forgive me National, for being cynical about your 10% bonus for NZ resident loan holders. Finally, Mr Key, why not ask the students, the graduates and the workers what they suggest the solution is to the loan issue? Show that you're actually listening to students; that your policies address their issues, and you will get their support. This would be seriously the best PR campaign ever and definitely the only shot you have of getting my vote ;-)
I agree Karlie! Kiwis are travelers after all, it should be interest free for all, as long as the payments are being made!
I'd just like you to know that you are a fool to think no interest isn't an incentive to stay in the country. Speaking as someone who has a student loan, I intend to stay in the country until I have paid off the loan because I don't want to incur interest. Please keep your ridiculous and rude opinions to yourself.
Thank-you Karlie for so adequately summing up the feelings of yet another highly qualified kiwi that had to leave New Zealand to pay off the loan. I am living in Switzerland and am waiting with baited breath for the 6 month period before the interest on my loan gets back-dated and starts accrueing. Really nice feeling. Frankly I think this is a joke. I was excited when I started reading this announcement, only to then be shattered by the news that I won't be eligible because I live overseas. Does New Zealand really want us back or not? Because I doubt I will return, not after the way we get treated. Far from encouraging me to stay in New Zealand, the policy introduced by Labour convinced me I wasn't really wanted. This policy just confirms it. Want to keep future graduates there? How about incentivising it properly. An option, for example, would be to wipe one years worth of loan fees for every year that a graduate works in New Zealand following their graduation. Think of this. For a measly $5000pa the government would possibly manage to retain a few brains, reduce a lot of stress, and the graduates that take up the offer would no doubt settle into their employment and hang around. Really, we should never have had this debt in the first place. What sort of country supports people to be unemployed but not to study (parental income tests)? John Keys, I challenge to actually respond to some of these comments. If you are going to have a Blog at least use it properly. A Blog is a conversation, not a speech. Karlie, if at possible, do what I do. Open a high interest earning bank account in New Zealand (ie, an online saver) and create a balance in it as high as your loan as soon as possible. Then, you earn more interest than the loan is charging. Maybe if you hold out for long enough a policy change will come along that you can actually benefit from. In the mean time... you can continue to be proud that you are a sought after kiwi being used elsewhere, and highly appreciated.
Thanks for your support and advice on the online saver Greg, might just do that - seeing as high interest is pretty much the only benefit NZ can offer me. Shame the exchange rate is so rubbish! I'm still waiting for a response from my post - apparently John's office thought I "raised some interesting points". Obviously not interesting enough ;-)
This still does not address the issue of how students are having to live whilst they study. Loans shouldn't have to be as big as they are. It's all well and good saying HEY! put $500 on to your loan and we'll pay 10% of that. I'm yet to meet a student who sees $500 as an amount that is easily attainable. And what about VSM? That's been kept pretty quiet don't you think? How about expressing to the nation what that will mean for student unions? An unbiased expression would be preferred Mr Key if you wish to make yourself look good. *Universal allowance for all!* Start talking about how you can help students survive *now* putting food on the table *now* being able to clothe themselves *now* Mr Key and maybe then you'll start to get students attention. But until then, you've got empty promises going on. Just like what happened in the 90s. Student Living is still worse off and it has NEVER recovered. At least Labour gave us something to work off with interest free loans.
While this is some improvement on solely an interest free loan, it really doesn't help us much. A 10% bonus is nothing, it really doesn't make you that much closer to paying off your debt. We are leaving university with such high debts it will take most of us a lot longer than 10 years to pay it off, which is all they are offering. 10% for 10 years. The living cost allowance only pays for weekly rent in certain areas like Auckland and Wellington. It is not enough to live off. Those who can get student allowance are lucky, they are eligible for $30 more a week than those borrowing. How bout you actually help us out a little here. My vote will be going to whoever does that.
I think the only way a student would get a head with voluntary payments would be if the government matched the students volunteer payment. For example if a student pays $500 the government pays $500, this would only apply to voluntary payments though. What you are offering isn't going to make much difference, in the short term, especially if you want people to stay in New Zealand and work. I also think that student allowance should be available to everyone. Why should I be assessed on what my parents earn when I am 23, have lived out of home for the best of five years and I am now living with my partner. Its insane!. I have to work weekends and any extra hours I get, borrow the $150 student loan and yet my parents still have to help me, I don't think its fair on them to need to help me. If the government was more willing to help students live and payback loans, they may be more inclined to work in NZ rather than move to Australia or Europe.
I agree with most of Kevin's comments #1. In addition, off topic but still on the subject of teritary education; Why is government funding for Universities in New Zealand less than Australian funding; 37% compared to 42% for comparable Australian universities according to a Deloitte study in 06. Why is it that the only New Zealand University to achieve a ranking in the top 25 Universities internationally is subsequently criticised for proposing to limit student numbers on some courses? Why do New Zealanders believe anyone should be able to go to University rather than believing that they should be capable of achieving? What percentage of graduates in a given year, say 2002, or 2003, are earning less than $25,000? How does the standard of education at our Universities compare to Australian Universities?
Awesome policy! I think it would encourage students to pay their loan back faster, it's a scary to have to look into the future and see a large amount of money waiting to be paid off! I want to make money in the future, not give it back to the government it would feel as if im a student again...POOR!So this is a good way of encouraging students like me to look into a bright future!
I think this a positive step towards helping out students who have taken on debt to invest in their futures via education. However, the fact that only those New Zealanders living and working in NZ are eligible is unfair and unwise in my view. Those excluded are exactly the kind of people who have gone out to pursue better opportunities in the hope of raising a deposit on a home, starting a business, and so on, and many of them intend to settle in NZ once again a few years down the track. Also, quite frankly, this highly skilled and educated group is more likely to vote for the National party than any other... The 10 year deadline on eligibility is arbitrary too, and would alienate that group in the same way. I do hope the National party refines this policy - it could be a strategic nail in Labour's coffin and could gain the support of thousands of students and recent graduates who voted for Labour last time (and who were quite likely swayed by the interest-free loan policy).
In the 2008 Student Loans Policy, you say that you will keep interest free loans for tertiary students. Does this mean that the interest free loan scheme will only be available to CURRENT tertiary students? Or does it apply to anyone with a student loan, whether they are studying or not? I am all for the proposed repayment scheme, but this means that I would have to make my repayments of $500 every 5 weeks to be able to afford it, rather than paying $100 out of my wages every week. Even though $100 payments are a lump sum payment and above and beyond the compulsory requirement, they would not qualify for this new repayment scheme, and that is probably a lot more manageable for people liek myself than payments of $500 or more.
This was a key aspect of National gaining my vote, and i look forward to it being implemented. As a first year student i am directly affected by this. Your policy on not universalisng student allowances is great. i think that the whole scheme should be scrapped to start with, i don't think that students who are all over 18 should be categorised based on their parents income. Personally i would never have fitted in the income bracket, and have to work part time for all my money. But i think as a young adult that this has been better for me and i thik that other youths need to learn more independence financially and should be liable for their financial decisions. Why should i work to maintain my living standard while others are able to benefit on the basis of their parents income. This is what got you my vote and i am looking forward to the next 3 years and beyond under a national lead government.
Interesting. I agree that 10% isn't a hughe incentive. My student loan is $35000 (4 years of studying, borrowing living costs most of the time - on occasion I tried to only work to cover my livingt cost, but this intefered with uni). I honestly don't see myself saving $1000 for a $100 bonus! I see more logic on going overseas, even wiht interest, to earn a wage that allows me to pay off the same amount (i.e. $1100 and that covered by interest) faster. On the other hand, its great that there is some incentive.... I am wondering if there will be any incentives specifically for postgraduate study. I have the grades and desire to complete postgraduate study. One of the major reasons (if not THE major reason) to delay this study is money. Highly educated people are a fantastic asset to a nations economy, and due to a combinition of the outrageous borrow to live sceme, alongside low paying jobs, does not encourage our nation to both train and retain those with advanced study.... Just a thought....
So what has happened to this promise? National has been in the house for 2 weeks and there has been absolutely no comment on this issue at all. When can we expect to see this bonus scheme implemented? Why is there no information whatsoever on the IRD website, or that of National, or the Ministry of Education? Please, write an e-mail to firstname.lastname@example.org and ask her these questions. I have been waiting for a response but have had none. If more people write, it will force the government to stand up and say what they are really going to do now, and how long we have to wait for it. I, for one, am not interested in waiting for this scheme to implemented in a year. you have had plenty of time to plan the process National, now you have the power... implement it. This should take less than a week to have up and running at this stage! I am ready to pay my loan. The money is sitting aside waiting. But if this isn't implemented within a month at the latest... guess who is going to skip. I could much better use the savings to buy a car.
Me and my partner live abroad and intend to do so until the student loan is paid. This 10% bonus on overpaments policy will bring in millions of dollars within weeks. (We've got a lot in the bank and are just waiting!) Surely that is what the Government needs. Also returning Kiwis bring the wealth, knowledge and contacts gained abroad back into the Kiwi economy. Given the current climate this is priceless. Why are National dragging their feet????
I too have not yet received a response but have sent another email to Ms Tolley. The Government would benefit greatly by student loans being paid back faster - it is surprising that it is not jumping to implement this given the current financial crisis.
After waiting for a month after sending my e-mails to Anne Tolley, I finally received a response. The letter basically claimed that it takes a long time to implement something like this. What a load of rubbish... simple accounting. I got fed up, and having decided that nothing was going to change in a hurry, I just paid back my entire loan in a lump sum. I missed out on a promised bonus of $2,700. Pretty annoyed about this, but now I can severe all ties with New Zealand. The brain drain continues.
You were lucky to get a reply in a month Greg - I still haven't had one after several months. However, I have been told by staff in her office that an announcement will be made 'in the first half of 2009'. We'll see. As for the claim you attribute to Anne Tolley, I note that the press release above is dated 31 January 2008 and the policy itself is dated 17 July 2008. That sounds like the long time Anne Tolley refers to, so why hasn't it been implemented by now? Any word too on the student loan interest rate? I would expect that to be slashed to around 3% on April 1st, or will that become a bad joke?
I have had a response from Anee Tolley via the National party HQ, it did take some time though but she was on holiday and that is important given the current financial crisis. I like many people have carried this loan for about 15 years and have made little headway, if the system was going to work should it not have been paid off by now? I have been told that she has instructed IRD to implement this policy during July 2009 and I have an email from her via the National party office stateing this. However I have been in contact with IRD and they no nothing about this yet. This is a no brainer the monies you recieve from lump sum payments and payments in full can be directed to towards paying the 10% bonus of individuals that are unable to pay the loan off in full. Come on Anne I have carried this for 15 years and I'm done with this! Please implement this policy out of the joy of doing what is right.
This is great, i have about a year left of repayments to make anyway through my employer, with this new system if i pay it all off 1April i get a 10 percent bonus.. 10% return for 12 month money - it is better than you can get at the banks! Then i can start saving the extra and earning interest on what i would normally be paying to the scheme. This is so simple in its design and plan, why didn't Labour come up with something like this a few terms ago and not this interest free thing that must be costing our country a fortune by now.
Great... so now I get a letter stating that this policy will be implemented on April 1st 2009. Fat lot of good it does me considering I gave up hope after their December letter and paid the whole loan in full. That leaves me almost $3000 out of pocket. All they had to do in the first place was tell us a date that this policy would be implemented and I could have believed it and waited. Giving a date didn't have to be so hard did it? I mean, seriously, you can say something will happen by 'given date' and then worry about how to make it happen afterwards. It is called planning folks! I am very happy for all of those of you who will benefit from this. maybe now you can cross your fingers for overseas borrower's getting an interest free loan too.
I think the policy should be valid from the day Mr Key took office in Wellington. National should keep their promise. I don't know why it took so long to discuss this issue, and finally the policy was implemented on 1 April 2009. I am working overseas, and saving money to support my family and meanwhile to pay the minimum repayment. I was told that National would have a new policy if they won. So I waited until early this March, I thought that would never happen. I did not want to pay lot of interests for my student loans. So I paid them off. What happened next just a few weeks later? National implemented the policy on 1 April, 2009. It's totally unfair to people like me who are working overseas/in NZ and just paid off the loans after Mr Key took office last November. Hope National can change their mind, and make the policy valid back to the date Mr. Key took office last November.