Student Loan Scheme Amendment Bill

The transitional provision in this Student Loan Scheme Amendment Bill relates mostly—in fact, entirely now, because one clause has been deleted—to the question of the definition of “contact person”, which is a matter that I was discussing in my earlier call. Had I had another call on Part 1, I certainly would have got up and expressed my concern that the National Government had not taken up the compromise position of a 2-year period for the repayment holiday. This was a pragmatic solution proposed by members on this side of the Chamber, and it is very unfortunate that it has not been taken up by the Government. It certainly runs in the face of the good old-fashioned Kiwi OE, and I am very disappointed that the Committee has not seen fit to support New Zealanders in the rite of passage that they have had for many years to take that OE for a couple of years. That is what that amendment would have done.

The transitional provision specifically relates to the question of the definition of “contact person”. The reason there needs to be a transitional provision is that the definition is changing, and those people who already are, I guess, contact people will not necessarily know. So the particular clause in question here contains the definition that will be found in new section 193A(5) of the Student Loan Scheme Act. For people who are reading along at home, that new section is inserted by clause 29 of the bill. Basically, what that is saying is: “(5) In this section … ‘contact person’, in relation to a borrower, means—(a) an individual whose name has been notified under section 16A in relation to the borrower; or (b) an individual nominated by the borrower under section 107A or 193B.”

The big difference here, as we discussed earlier in the debate on this bill, is that the person who has previously been listed as a contact person for a borrower is now going to be more likely to be contacted than they ever were before. Previously when people have given contact details, it has really been a fairly perfunctory exercise. It is one where, simply, contact details are given and, if someone is in default, they would be contacted. Now, the provision—and why there is an important transitional provision on this—is that that is changing. It is a transition, so it is important that the contact people who have been identified by borrowers will now know that they have an additional responsibility. That is covered in new section 193B, which is referred to via new section 193A(5) in the transitional provision.

New section 193B actually lists some of the responsibilities of a contact person. It is worth noting that section 193B(2) states: “If there is a change in any of the details of a borrower’s contact person, the borrower must promptly notify the Commissioner of the changed details.” That is actually something that now impinges not only on the contact person but also on the borrowers themselves. Will they know, necessarily, when they are overseas that the person they have listed as a contact person has moved? Perhaps that is why this new clause ends up being referred to as part of the transitional provision. It is to give time for people to get used to this new role that is put on both the contact person and the borrower.

So these are actually substantive changes, and I guess at one level it is good, then, that there is a grace period through to the end of the year put in place by the transitional provision. But on the other hand, as I said during my earlier call, I actually think these changes are significant enough that it will come as a surprise to some people. As I was discussing earlier on, parents who have become the contact person by default, virtually, for their children now actually have a set of responsibilities. If they move, they had certainly better let their children know, because that is actually the responsibility that now falls upon the borrower. The transitional provision is one that clearly is necessary in order to put in place the changes, but, I guess, on this side of the Chamber we raise some question about those changes, because just being a contact person has been a very low-level activity; now it is a much higher-level activity.

We do have to remember that the student loan is a loan contract between the borrower and the Crown. These contact people actually have no responsibility for the loan itself, so they are getting quite an additional role. They are going to be contacted by the Inland Revenue Department. They are going to be contacted by the State. Their name and their details are going to be kept by the State, and will obviously be updated on a regular basis if the borrower is fulfilling section 193B, which has been included in the bill. So it is actually quite a substantive change, and I know that Mr Dunne acknowledged that when he was in the chair earlier on. I do think that if this bill passes in its current form, it is going to be something that will be different.

I am not going to take much more of a call, other than to note that the transitional provision is not just the normal one about dates and things. It actually relates to a substantive change around what it is to be a contact person for a student loan borrower. It is now a much bigger job; one where you will be contacted more often. I do think that is going to come as quite a surprise, particularly to some of the parents in New Zealand, and I hope they are huddled over their radios tonight to know what the change will be.

That is a good point to continue, because for those people who are currently identified as contact persons there should be some obligation, I would think, to notify them about the change of their status and the new expectations they will inherit as a result of this Student Loan Scheme Amendment Bill. So the Minister in the chair, the Minister for Courts, should take a call on that particular aspect, because it is only right that people are informed if there are new obligations resulting from this legislation.

That communication should go out for a specific set of people who are currently identified as contact persons, so that when the new bill comes into effect, as of, I guess, 1 January 2013, because that section will be repealed, they should be informed that they have identified with the current set of contact people and that they have new obligations, and they should be asked whether they want to continue to be contact persons in the event that their children, or whomever they are the contact person for, may go overseas. I think that is a really important point, and it is the point that I raised in the previous part.

The opt-out provisions should be very clear for existing contact persons who no longer wish to continue to be of that status going forward. There should at least, as a matter of courtesy, be an opportunity to update and inform them about the new provisions of the Act and, by default, the expectations that they will inherit, and, secondly, the opportunity to opt out, should they no longer wish to be a contact person. That is more an obligation in terms of the Inland Revenue Department, I would think, rather than the borrower, because this is something that is a carry-over function of the existing system. Kia ora.

I rise to take a call, and as I do I want to comment, to start off, that this is perhaps one of the least offensive provisions in the Student Loan Scheme Amendment Bill. So my comments must be taken in that context.

As I start, I just want to remind us of a few facts. I do want to talk about the barriers that this presents, because I think it contributes further, in some small way, to the barriers to tertiary education that I spoke about in debate on Part 1. Reminding ourselves that 58 percent of the borrowers are women, that $17,000 is the average amount held in a student loan, and that the total debt is $12 billion, these provisions in this particular part, Part 2, are all aimed at grabbing back—grasping back, perhaps we could say—some of that debt hole that is running up. The contact person is a means of getting to those who have money owing, and perhaps it is those who have taken a repayment holiday and who have disappeared into the ether.

There is a sense that this is all part of the same objective, and it is all aimed at grasping back $5 million of a $12 billion debt. In that context the fact that we are spending an estimated $2,761,000 worth of parliamentary time to pass this bit of legislation is infuriating. It is spurious to suggest that this will encourage students to repay, when the Government’s own officials at Treasury and the Ministry of Education have questioned whether this is really true. In fact, they suggest that this legislation, as it relates to those who are overseas, may in fact encourage them to stay overseas. It presents a barrier in that respect.

The Labour Party is, of course, opposed to barriers to tertiary education, and this relates to our belief in the basic principles of fairness and opportunity. They are principles that National has historically tended to ignore when it comes to dealing with the student loan scheme. We will remember that Labour introduced interest-free loans and National introduced a fee for administration—

The CHAIRPERSON (Eric Roy): Order! This is quite a narrow debate. It is the transitional provisions.

Just returning to the point, which is about collecting this debt and the role of contact people in that—Mr Chairman, I thank you for your guidance—I really wanted to say, and I will draw to a close shortly, that the parents of a person undertaking tertiary education are the best predictors of that person’s outcome, and they will likely be the people who are those contact people. If there is a sense, when students go to undertake tertiary education, that they are going to be reported on by their parents if they fail to meet some of the payments or they fall into difficult circumstances whilst overseas, that will be very disappointing indeed. That is why I think it is important that this is clearly signalled to those whom it will affect, and that we remain conscious of the potential barrier—another potential barrier—to tertiary education that could exist in naming a contact person and making that contact person provision stronger.

As I have said at the beginning, and to conclude, this is perhaps one of the least offensive provisions in the bill, but I think it is worth considering the implications of it. Thank you.

Thank you for the opportunity to take a short call on Part 2 of the Student Loan Scheme Amendment Bill. I will not take up a lot of the Committee’s time, but I would like to reiterate the invitation to the Minister in the chair, the Hon Chester Borrows, to take a call to answer some questions about this part. I thank the Hon Nanaia Mahuta for her contribution on this earlier. I would also like to know how the increased responsibilities for those who will be taking on the role of the contact person will be notified to those who are currently named as contact people in relation to this legislation. I would like to know whether they will have the opportunity to opt out of that, and how they will be provided with that opportunity. I would like to invite the Minister in the chair to take a call to explain that to the Committee.

Thank you very much for giving me the opportunity to speak to Part 2, which is a very narrow debate, as you have already mentioned, around transitional provisions around the contact persons for people who have gone overseas and who have student loans. The ears of parents around New Zealand who are watching this debate right now have pricked up, because they want to know what their sons and daughters are going to get them into when they are heading overseas. They are also a little bit worried about what this provision and the provision in Part 1 around the repayment holiday may mean for them, if their sons, daughters, or loved ones are going overseas for more than just the 1 year.

For the benefit of those parents at home, I would just like to point out again what a contact person constitutes, in terms of the Student Loan Scheme Amendment Bill. It means that if someone is going overseas, you have to tell the Inland Revenue Department who this contact person is. You are going to have to, obviously, identify this person, give the Inland Revenue Department their postal address, an email if they have one, a telephone number for this individual, and any other information that may be specified in the regulations. With the transition to this contact person regime within the bill—at the moment we have a quasi-regime, where some people have taken on this duty with their sons, daughters, or loved ones already, and they have an amount of responsibility—now they are going to have a fair deal of responsibility. It is not responsibility for the amount of money that is owed, but if the person who is overseas were to go missing, or not pay their student loan back in time, then this is the person whom the Inland Revenue Department staffers, on behalf of the commissioner, will call to ensure that something is done about the money that is owed. And we do note that there is a transition period, which is dated up to 31 December 2012, I believe. We hope that the Inland Revenue Department, as Nanaia Mahuta has already pointed out, will be able to contact as many people as possible, to tell parents that there is going to be a little bit of added responsibility on them for their loved ones—for their sons and daughters—who have gone overseas.

As David Clark has mentioned already, this is something that we think is relatively pragmatic, to use that word again—

💬 Dr David Clark: It’s common sense.

—and relatively common sense, but maybe there will be a degree of concern amongst parents in New Zealand at the moment whose sons and daughters may be reaching graduation, and talking about heading overseas to Europe for their big OE. Their parents—

💬 Grant Robertson: Only there for a year now.

And it may be shorter now; that is a good point. But there will be a degree of concern amongst parents who have loved ones who are nearing graduation and looking at going overseas, when they know that these students have student loans. Some of them may have hefty student loans. Those parents may know that they may not be coming back. Those parents may also be worried that they will be receiving a phone call, an email, or a piece of mail through their letterbox to say “Hey, where’s your son? Where’s your daughter? They haven’t paid their student loan back on time, and you’re going to be in the gun for it.”

We welcome the transitional provision within the bill. We think it is relatively pragmatic, but again we do feel the pain and the concern of many parents out there in New Zealand who are worried about what this may mean in terms of their loved ones, who now may be going overseas for a little less time than traditionally has been the case for Kiwis on their OE. Thank you.

I move, That the question be now put.

The CHAIRPERSON (Eric Roy): I am sorely tempted.

I appreciate the opportunity to take a call on Part 2, “Transitional provision”. I have not taken a call in the Committee stage of this bill but I have been sitting here as a parent with a child overseas, feeling somewhat alarmed.

💬 Grant Robertson: Are you the contact person?

Have I been named as the contact person by my son and daughter, who happen to live in San Francisco at the moment? They do have a student loan. Am I the contact person, and how would I know? Under this transitional provision, I am not certain, even though it does appear to give some breathing space in that it is a transitional provision until the close of 31 December. So there is some breathing space, I think, so I might have some time to find out whether I am the contact person and whether my address, my email, my phone number, and other details have been given to that very, very frightening but very efficient department called the Inland Revenue Department.

I felt moved to take a call on this transitional provision in Part 2 to ask the Minister in the chair, the Minister for Courts, some questions about this. As I said, as a parent with children overseas, like so many parents I regret that my children have decided that they have to go and live and work overseas. They have taken other opportunities because—

💬 Dr David Clark: More and more New Zealanders are doing it.

Thirty thousand or so have gone to Australia, but actually my children have gone further afield, as I said, to take up opportunities that they simply cannot get in New Zealand.

I also listened to the debate about repayment holidays. I do not want to go into that now, because I know it is not relevant—and thank you, Mr Chairperson, for your guidance—but, as I said, I do feel very, very moved to take a call, as a concerned parent, about what this transitional provision will mean. For the purposes of those people who are listening on their crystal sets tonight—

💬 Grant Robertson: Thousands of them!

—thousands of them listening on their crystal sets—let us see what it says. It says in clause 34(1): “Until the close of 31 December 2012, the definition of contact person in section 193A(5) of the principal Act must be read without reference to paragraph (a) of that definition.” I am trying to find my way through the bill and through the principal Act to see what that means, but what it says to me is that there is at least some breathing space for me as a parent, and for my children who have escaped overseas, to reconsider whether—

💬 Grant Robertson: You want them back?

—of course I want them back—but to reconsider whether I am a suitable person to be a contact person under this bill, and whether they may want to think about whether they want to expose their parents to the vagaries of this bill, particularly with all of its consequences with the shortening of the repayment holiday.

As I have said, I have listened to the debate with great interest. I will follow the debate further. I am deeply disappointed that we have not been able to persuade the Government to make amendments that may well have led the Labour Party to support this bill, but unfortunately, because of the Government’s attitude, the lack of common sense that we have had—

The CHAIRPERSON (Eric Roy): Order! Transitional provision.

—and the lack of common sense, perhaps, in the transitional provision—

💬 Dr David Clark: There’s no lack of common sense in the transitional provision, though.

True. Well, we could have had a longer transitional provision, of course. It could have been until 31 December 2013. That might have been of even more comfort to me as a parent. But I do appreciate the opportunity to take a call on the transitional provision in Part 2.

I move, That the question be now put.

Motion agreed to.