Loan offer response to appeals

Students could have less debt under Labour's tertiary education policy – but not everyone is convinced of the benefits, as Andrew Laxon reports.

Labour's tertiary education policy is dominated by promises to lift the $3 billion student loans burden.

The party promises to waive interest payments for fulltime, low-income students while they study and for former borrowers until their income reaches $25,000.

The changes would cost $115 million in the first year, $124 million in the second and $130 million by the third year of a Labour-led Government.

They make up the lion's share of Labour's $750 million spending promises on tertiary education ($200 million, $250 million and $300 million over the three years) - the party's second largest spending commitment after restoring superannuation levels.

Labour's tertiary education spokesman, Steve Maharey, said that in 1996 Labour was under pressure from students to bring fees down.

This time, growing student loan debt was a greater concern for all New Zealanders, including Rotary and Greypower members, who were worried about their children and grandchildren.

"In the last three years this has become not just a student issue, but a family issue. People say, 'You've got to do something about those loans'."

The downside for Labour is that it has no money left for student allowances and has had to fall back on vague promises to address this issue in its second term.

It is also refusing to guarantee lower student fees, despite its promise to increase course subsidies by $220 million over the three years ($55 million in the first year, followed by $70 million and $95 million).

Mr Maharey said he hoped the extra money would "stabilise" fees at first and then gradually bring them down by agreement. Labour would expect fee decreases from institutions in return for increases in funding.

Students who are both fulltime and low-income would not be charged interest on their loans while studying.

Mr Maharey said the term "low-income" had not been defined yet. It would obviously not include businesspeople who took a year off work to get an MBA (master of business administration).

The Ministry of Education has costed this part of the policy at $53 million in its first full year, allowing for an $11 million increase in borrowing by students eager to get their hands on free money. Once they enter the workforce, borrowers will not pay any interest on their loan balance until they are earning $25,000 - 100 per cent of repayments will go to principal.

Interest will be gradually phased in for those who earn between $25,000 and $30,000. Borrowers will not be charged the full interest rate until they earn more than $30,000. Even then, at least 50 per cent of repayments will go to principal. Any interest not covered by the remaining 50 per cent of the payment will be written off.

Students could borrow up to $1000 for course-related costs. This was the previous level, before the Government cut it back to $500 last year.

Like the Alliance, Labour is promising to undertake a "thorough review" of the loans system, including the economic and social impact of high student debt levels and whether fear of this debt is putting young people off tertiary education and encouraging them to go overseas after graduation.

Labour also says it wants to replace National's competitive, free-market model of tertiary education with a more cooperative, planned approach. It would establish a Tertiary Education Advisory Commission, which would advise the Government on long-term strategy and immediate priority areas for extra funding.

Extra research funding - starting at $10 million and increasing to $30 million by the third year - would be given to projects identified as top priority by the commission. A further $17 million over three years would go on a small business research fund and establishing group research trusts to identify potential projects.

The New Zealand University Students' Association described yesterday's policy as a mixed bag for students. Its co-president, Karen Skinner, said Labour's changes would ensure students could lessen their total debt but students were still borrowing to buy food and pay rent.

"We are disappointed that Labour did not take any action over the issue of student allowances. We would also have liked to see fees coming down for next year."

Alliance leader Jim Anderton called the policy very disappointing.

"The Alliance is now the only party that is committed to reducing student fees," he told an Association of Staff in Tertiary Education conference in Wellington.

"Average fees next year will be $3500 at university or polytech. That is far too much. It is a barrier to participation, preventing our best and brightest from getting a complete education.

"By refusing to change student allowances, other parties are sending the message that it's better for young people to languish on the dole than increase their skills through tertiary education."

Act leader Richard Prebble said that giving students interest-free loans while they were studying would double student debt and cost the taxpayer more than $1 billion.

"A third of all students today have no debt. But every student will have a huge incentive to take out the maximum loan if it's interest free, even if they intend just taking the money down to the local savings bank to earn interest.

"Unfortunately, between receiving the loan and getting to the savings bank, many students will find the temptation too great and will spend it on a trip to Bali."

New Zealand First education spokesman, Brian Donnelly, accused Labour of borrowing NZ First's education policy on student loans, but foolishly neglecting to make repayment subject to inflation.