Editorial: Attack the fees, not the debts

As general elections loom, all sorts of policies are proposed to ease what is widely perceived to be the onerous debt burden afflicting students. The National Party's approach, announced yesterday, is yet another of these. And like the vast majority of them it fails to address the fundamental factors fuelling the growing debt of the student loan scheme.

National has pledged to make interest payments on student debt tax deductible. This would cost about $70 million a year to implement, and would result, the party says, in several years being trimmed off the time it takes to repay loans. For those saddled with debt, this will offer a small degree of relief. But it does nothing to stop that debt being accumulated, and it is there that any serious attempt to tackle the problem must be made.

It should be said at the outset that the extent of that problem is much overstated. The student loan scheme allows young people to borrow against their future earnings on terms that are the envy of other investors. The average student owes about $15,000, and it takes graduates an average of 9 1/2years to repay their loans.

The vast majority seem, indeed, to be handling their debt very well. As much as student leaders demand radical action, this is not a situation that calls for dramatic flourishes from politicians. Nor, National's contention notwithstanding, is student debt a hugely significant factor in the flight of New Zealanders to better-paid jobs overseas.

If, however, we are to set about reducing the current $6.9 billion student loan debt, there must, first, be a recognition of its relationship to the level of tuition fees charged for tertiary courses. Those fees typically tripled or quadrupled during the last decade of the 20th century as the notion that all school leavers needed tertiary education to gain employable skills took root. During that time, the number in tertiary education grew 40 per cent. Institutions, acting at their most entrepreneurial, provided what were, in essence, workforce training courses. Apprenticeships were supplanted as on-the-job training became unfashionable. Trainees had to pay, and take on debt, to learn.

Clearly, this trend went too far. If the bulk of trade training was retrieved from the institutions (in large part through the revival of apprenticeships), and the cost to the public of tertiary education dropped, lower fees would be possible. Tertiary institutions would doubtless jib at this. Their activity, however, has been the trigger for the hike in tuition fees, and for the growth of the loan scheme.

It is also apparent that a fairer student allowance system would see more people receiving financial help as they undertook their studies. The thresholds pertaining to parental income currently bear little relation to present-day earnings. There is also no consistency with the wider social welfare system; the accommodation allowance for the unemployed is higher than that for students. The affect, once more, is to propel students further into the loan scheme.

Yet this, again, is not an area that demands radical surgery. There is no requirement for a universal student allowance. On the one hand, the country cannot afford it; on the other, the burden on students is not so grave as to warrant it.

Overall, the loan scheme is working. The vast majority of students see their debt as an investment, and are handling it capably. If, however, politicians must respond to the student bellow, let them focus on the reasons for the debt, not the end-product.