Student Loan Scheme Bill

I move, That the Student Loan Scheme Bill be now read a third time. The measures contained in this bill are designed to make it easier for borrowers to manage their loans and to pay back what they owe, which in turn will help the Government to better manage this substantial Crown asset.

The first of these measures sets the framework for consolidated loan information to be provided electronically to borrowers by the Inland Revenue Department. Borrowers will be able to access information on their loan balance and manage their repayment responsibilities wherever they are and at any time. This includes borrowers who are currently studying, so they will no longer have to contact two agencies for this information. In addition, the majority of borrowers with income from salary and wages only will benefit from reduced compliance costs as a result of the removal of the current annual end-of-year assessment. However, borrowers who have significantly overpaid their pay-period obligation will be able to apply for a refund. The result of these changes will be a simpler, more effective way for borrowers to self-manage their loan responsibilities, and a more efficient, cost-effective framework for the Inland Revenue Department to manage its interactions with all borrowers, in New Zealand and overseas.

At the same time, the bill recognises the importance of borrowers honouring their repayment obligations. To further encourage borrowers to take a responsible approach to their loan, the bill simplifies the current penalty rules that apply when borrowers fail to make loan repayments when they should, and strengthens the ability of the Commissioner of Inland Revenue to recall a loan in cases of serious non-compliance.

These are the main features of the bill. I would like at this point to acknowledge those whose efforts have contributed towards the successful passage of this legislation so far. I thank my officials and the drafters who have worked on the detail of the bill, and those who made submissions on the bill to help improve the practical application of the measures it contains. I thank the Finance and Expenditure Committee, too, for its consideration of the proposed reforms and its recommendations to give greater clarity to the legislation.

As it now stands, this bill will make it easier for borrowers to take responsibility for repaying their loans, and will make it easier for the Inland Revenue Department to administer this important investment for the future. Consequently, I have a huge amount of pleasure in once more commending this bill to the House.

As has been said before, the Labour Party supports the Student Loan Scheme Bill. As we have said in both the second reading and the Committee stage, this bill will assist in the collection of student loans. It streamlines the student loan system. It will mean that students are able to go online, see their loan status, pay online, and keep in communication with the Inland Revenue Department much more effectively.

Certainly, the bill will improve the situation at the moment in relation to about $2 billion worth of loans held by students who have gone overseas. Although many of those people may not want to pay off their student loans, many of them possibly would like to but have difficulty accessing the system. I suggest that the sum that this upgrade purports to save by 2014 could be significantly more than $22 million, just from the fact that people will pay their loans back on time simply because it is easier to do. People who are working in Australia, the UK, or somewhere like that will be able to pay online. If they want to come back to New Zealand they may decide to pay off a bit more of their student loan, because when they do come back to New Zealand they will have to do that.

I remind members about the size of student loans in New Zealand. The nominal value of loan balances now is around $11 billion. About 587,000 people have a student loan with the Inland Revenue Department for collection. The average amount borrowed is just under $7,000, although, as my colleagues have said, we have heard of loans in excess of $15,000 and $20,000. Students who remain in New Zealand pay off their loans in about 4½ years, once they are earning a salary and have reached the threshold of around $19,000, which actually is not very much. Nevertheless, they start automatically paying back that money at that time.

For the Labour Party, the issues around the implementation of this bill are certainly not its modernising the system and moving forward, which are well accepted. A couple of issues, though, that have come up in the course of the debates, particularly in the Committee stage, are worthy of mention at this point. The first is the additional charges: the $60 one-off charge and then the $40-a-year administration charge. Given the fact that this system will save us money, save New Zealand money, I would argue that these charges are another imposition on students. Students are stretched at the moment. Coming through the House at the moment is the Education Amendment Bill (No 4), which limits levies, but we know that levies in universities, in particular, will go up. We know that if the voluntary student membership bill goes through, it will gut the students associations. Instead of a voluntary contribution to the students associations there will be a mandatory levy. It will be levied by the university, because that is what has happened in every single case in both Australia and here. The students associations provide a plethora of different services that are valuable, but they will not be able to do that.

The other thing I want to point out with regard to student loans is that they apply to every New Zealander who wants to take out a student loan bar those aged 55 and over. So from here on in this legislation has absolutely no relevance to people aged 55 and over, because they are not eligible for a student loan. I would like to say that the instrument that was brought in by the Budget this year is discriminatory against those aged 55 and over. They will not be able to access the same assistance and support when they go through university as everybody aged under 55. That is discriminatory. If we are talking about an education system that is meant to be serving everybody, and if we are talking about an education system that will both upskill and provide people with in-job training so that they can take on, and adapt to, the changes that will happen in our workforce, then that provision is a major step backwards. Although I believe that this legislation will certainly help those people with loans, or people who will get loans in the future, that luxury, that right, has been taken away from some members of our society who choose to go into tertiary education. They will not be assisted to do that.

I would argue that 55 is a pretty young age in today’s world and in today’s workforce. We are looking at the retirement age being extended further and further out, if we follow the trends of all other countries in the world. If that was to happen—and we know that people would like to work longer and longer, as health improves—then those people who would like to retrain will simply not be able to do that, if they require additional support and assistance. I come back to the point of this legislation, which is smoothing the way, upgrading our ability to get back student loans, and assisting those who have student loans to repay their loans. That is a good thing. It certainly is not going to be the case for many.

Lastly, I want to touch on the point that the Minister of Revenue raised in the Committee stage regarding the computer system. There is a great deal of consternation out there that around $21 million out of the $35 million that was appropriated for upgrading the computer system has been spent on the Oracle system. I accept the Minister’s argument that it is a very complicated procedure to move so much information into one computer system, but I should say that we have had follies of computer systems in the past. We have had a number of occasions to, I guess, warn us to keep a very, very close eye on the spend for this particular project. We are now going back to the first system—the Oracle system, as the Minister said, will kick in a bit later—so that this legislation can take effect earlier, which is, in principle, a good thing. I come back to the fact that computer systems and upgrading computers have been hugely traumatic and problematic in the past, and I hope that does not happen with this computer system. Labour will be keeping a very close eye on it.

In conclusion, once again I would like to give the Labour Party’s support to this legislation. It improves the administration and, hopefully, the repayment of student loans.

I will take a call on the third reading of the Student Loan Scheme Bill, but I do not want to traverse the ground covered in my contribution in the second reading debate, when I went through, in a nutshell, the salient parts of the bill as I saw them. I will briefly touch on some of the blatant inaccuracies and misrepresentations from members opposite in this respect, because I think they need to be addressed. The first of those is to do with the fees. Both Labour and the Green Party have expressed their concerns about those. They have expressed outrage and indignation about this one-off $60 establishment fee, which is charged when the student loan is first taken out—

💬 Grant Robertson: It was 50.

—it was $50; that is right, so it has gone up a whole $10 as a one-off fee—and about the $40 Inland Revenue Department administration fee.

It is worth pointing out that the changes that this Government has made to the student loan system are about making the system sustainable into the future, because the total debt is not, in fact, $11 billion, as the last speaker, David Shearer, said. The student loan debt book currently sits at over $12 billion, and within 3 years that will be well in excess of $14 billion. This is a huge item on the Government balance sheet, and we have to ensure that it is sustainable as we go forward, so the changes we have made have been very much about ensuring that.

One part of that sustainability is being up front about the fact that there is a cost to run this system, and that cost is around $17 million per year for the work done by the Ministry of Social Development, which administers the StudyLink part, which is covered by the $60 fee. So even previously there was a $50 set-up fee to cover those Ministry of Social Development costs of $17 million per annum. But the Inland Revenue Department has annual administration charges around the system of over $22 million a year, so I think that having an administration fee of $40 per annum go towards that $22 million administration cost is absolutely justifiable and very sensible, and, as I say, it goes to the sustainability of the student loan policy as we go forward.

The other issue I want to touch on—and I touch on it only because Labour members have continually gone back to it, albeit it is not in this bill—is the issue of borrowers aged over 55. A couple of points need to be made in order to set the record straight. Firstly, those over 55 can still get student loans, despite Mr Shearer’s repeated, completely incorrect statements on that. They can get student loans for their tuition costs.

💬 Grant Robertson: They can’t get them for living costs.

Mr Shearer’s argument was that they could not access student loans whatsoever, which is wrong. They can get student loans for their tuition costs. Do members know what is really interesting? Just a few days ago the media was reporting that the worst group for repaying student loans were the over-55-year-olds. The single worst group at making any repayments on their student loans were the over-55-year-olds.

Let us be very clear that this bill does not in any way address the eligibility of over-55-year-olds. What it does is make the system sustainable as we go forward, provide a contribution towards the administration costs of running the system, and make the system easier for taxpayers to comply with and easier for student loan borrowers to comply with, and that is to be commended.

I encourage anyone listening to this debate to ignore the incorrect rhetoric coming from members opposite and focus on the fact that this bill is set up to make it easier for borrowers to comply, and to make the scheme sustainable in terms of its administration costs. [Interruption] Labour members can bleat and moan to their heart’s content, but that is not what this bill is about, and their contentions are simply wrong. With those few words I commend the bill to the House.

I will just pick up on some of the comments of the member opposite who has just resumed her seat, Amy Adams, about the over-55-year-olds and their capacity to learn and continue learning. It is essential, if we want to encourage people to continue to learn, have flexibility, and pick up new careers, that they should have access to training, skills, and higher education. Obviously, we need only look at the number of career changes that people have in life—at 55, people may well be working for another 20 years, with plenty of time to repay loans. I would like to see the evidence that those people aged over 55 were paying the least amount of their student loans, because that would be absolutely out of line with everything that I know about that sector of the population, who are generally regarded as being the most responsible people in terms of their debts and obligations to society. I would like to see evidence presented, and we have not seen it.

That matter is not at the heart of the Student Loan Scheme Bill. At its heart this bill is about encouraging the repayment of student loans. I support the notion that we must have a facility like the student loan scheme to allow people on to the staircase of higher learning, and the reason for that is not just the higher incomes that it brings to them but also the higher productivity and prosperity it brings for us as a nation. I think we might be beginning to work out as a nation that we cannot simply make our way in this world with our hands; we need the skills from our heads, and we need the highest possible educational outcomes and achievements from all in our society, and that is why the student loan scheme has been an important mechanism. We acknowledge the costs that it represents, and that is why Labour is supporting this bill. But we should not forget the principle involved, which is that we want everybody in society to be able to go into tertiary education to upskill themselves so that they can contribute, not just for themselves and their families but also for us as a nation, and that is why we have a student loan scheme.

On the costing of student loans, we have had figures presented to us by the Inland Revenue Department and Treasury stating that it sits currently at about $11 billion - plus, and is projected to go to $14 billion or $15 billion. Those are big costs. When we consider that the current education spend per annum is in the same order, of around $11 billion - plus, obviously the scale of the student loan debt is high. This bill is beginning to address some of those issues, but I would also note some of the amounts involved. It was interesting, I thought, to see that the gain suggested, in the order of $22 million over a total cost of $11 billion of the student loan portfolio, is only about 0.5 percent and does not seem to be in quite the scale of things that might have been projected.

This bill also recognises that we need technology to connect to students, many of whom go overseas. I was very pleased to see that in his final speech to us as parliamentarians, our outgoing Governor-General, Sir Anand Satyanand, used his iPad to read his speech to us today. I think that that is an acknowledgment. Sir Anand is probably somebody, let us guess, who may be in his 60s now. I do not want to be unkind or uncharitable, but there is somebody who might well go on to yet another career, despite the distinguished career he has already had. There he was, using the technology of the 21st century, and that is at the heart of this bill. We will see the Inland Revenue Department implement a system whereby we can go online, check our balance, make our payments, and contribute back to the nation for the education that we have had, in some part. That is why Labour is in support of this bill.

I just note that the regulatory impact statement states that although most borrowers will benefit from the changes, some will be disadvantaged. That is why Labour has picked up on the situation of some of those people during the course of this debate. It is the role of the Opposition to point out some of the holes and inadequacies in legislation. Yes, a $40 administration fee per annum may not seem a lot, but it does add up cumulatively over the time of a loan. We are talking about a normal loan period in the order of 5 years, and obviously at first students are not very able to pay. Once they come into a job they are better off, but it is still a fee that will cause some of them some disquiet.

I was particularly pleased to see in the bill the move on the late-payment penalties, because it really was a usurious rate when debtors were effectively being charged credit card interest rates, at 19.5 percent per annum. If we want to encourage people, we have to make it clear to them that they will be treated fairly, and that was not fair. I think that, basically, it said to some people that they did not need to bother, because it was too hard and the interest rates were too high. The interest rate has been pulled back to about 10.5 percent, or about 8.6 percent if debtors go into instalment arrangements. That provides the correct sort of incentive and signal to former students that they need to take on their responsibilities, and that the State will assist them with that, not treat them as a credit card company might.

As we have discussed, we have $11 billion of debt in respect of the loan balances of the student loan scheme, and nearly 600,000 people owe money. We want to encourage more people to come into tertiary education, not discourage them. The average amount of borrowing is only in the order of $7,000. Obviously, we have put all of the half a million - plus former students into a total, which is why we are seeing the numbers involved and why the projections go to $15 billion by 2015.

That is why Labour is supporting this bill’s passage through Parliament. We have some disquiet about some aspects of it. We have raised those concerns in the appropriate setting. We are particularly discouraged by the allied move in Budget 2011 to exclude over-55-year-olds from the potential to benefit from the changes made to this bill. We do not regard that as appropriate. That is a very, very discriminatory signal to those in the 55-plus community, who from the beginning of the year after next will not be eligible for the student loan scheme. That is a very negative signal.

💬 Aaron Gilmore: That’s not true.

That is very clearly what will happen. The Minister’s announcements accompanying the Budget on 19 May were that from the beginning of the year after next—as of 1 January—students who are aged over 55 will not be eligible for living costs or course-related costs.

💬 Aaron Gilmore: Ah!

The member opposite can tell me what other component of costs students face. That is exactly the point and it is at the heart of what we are saying. Those people are being disadvantaged and discouraged from trying to get themselves into another set of learning and acquire some extra skills. Therefore, they will not have the opportunities that would then be in front of them to allow them to learn another career or another discipline and to move into another job.

At the age of 55, people still have 15 or 20 years of working life ahead of them, if they so wish. That is why Labour says that making students over 55 not eligible for the scheme is not an appropriate part of the Government’s moves on student loans. Those people should be eligible for loans and should be able to benefit from the changes made in this bill, in terms of the greater flexibility that is provided for repaying loans—to be able to go online and repay them—and in the lowering of interest rates. Those are all positive changes, which are welcomed, and a tidy-up of the student loan debt profile will result, even if it will be modest.

We have considered the bill in great detail through the Finance and Expenditure Committee. In closing, I acknowledge the work of the select committee under the previous chair, Craig Foss, and the incoming new chair, Amy Adams. We have worked comprehensively as a select committee on this bill. I thank those officials from the Inland Revenue Department and other departments who have assisted us. It is a complex issue. I also acknowledge the work of my colleague Stuart Nash, who is not able to speak on this bill today but who has put enormous work into this bill on behalf of the Labour Opposition. Thank you.

My colleague Gareth Hughes would have liked to speak in the third reading of the Student Loan Scheme Bill, but he is unable to. He has left me some notes in the form of writing on paper.

Kia ora. It is good to be addressing student loan issues. However, this bill, although dealing with a few specific points, ignores the elephant in the room, which is the massive and growing student loan debt. The Green Party supports the general intent of this bill. However, we will be voting against it because it increases the already huge student debt burden facing Kiwis. This bill increases and introduces additional student loan fees, which will just add to the national student loan debt burden, extend the time it takes to repay a loan, and, because it reduces the effectiveness of the voluntary repayment bonus, take things further back.

The national student debt is now in excess of $11 billion, as we have heard, and the loan burden facing hundreds of thousands of Kiwi students and graduates is having a negative effect on families, society, and the wider economy. The student loan scheme was established in 1992 and has been a failure. The current total debt as of 30 June 2010 is a staggering $11,145,000,000, and is growing at $1 billion a year.

For the more than 560,000 New Zealanders who have a student loan, this debate is not academic. The average individual debt is around $28,800, which is close to the median New Zealand annual income, and takes years to pay back. Meanwhile, families are delayed, homes are not invested in, and graduates are struggling with the debt.

We voted to support this bill’s referral to the Finance and Expenditure Committee for investigation, because we acknowledge that there are common-sense parts to the bill that we support. However, we have flagged our concerns regarding the new fees. We would like to repeat our thanks to submitters, officials, and members of the committee.

There are some good aspects of the bill. This bill aims to make the student loan scheme simpler, which will benefit students as well as graduates. It cuts down on the administration of loans. At the moment there are two bodies that share information—the Inland Revenue Department and StudyLink—and students and graduates have to go backwards and forwards between the two. So that change is an advantage of the bill.

We also support greater electronic management of student loans. We think this is beneficial in terms of reducing administration costs for the Inland Revenue Department. But, most important, it will give students greater information, and transparency around their loans, and, hopefully, will encourage them to pay them back faster if they possibly can.

It is incredible that it is not until this year, 2011, that the New Zealand Government is transitioning to electronic management of loans. This change, in particular, makes it easier for overseas borrowers to access information, and there are hundreds, if not thousands, of student loan refugees overseas—which creates an amazing skills deficit for our country—each with their own tale of how the student loan burden got out of hand for them.

Those are the positives. On the other side of the ledger, however, is this: if greater electronic management and increased efficiencies are achieved, as the Government intends, then the Green Party cannot fathom why the Government would need to bring in new and increased administration fees. Surely, if costs are reduced, the Government should be reducing fees, not increasing them. The increase to $60 for students drawing down a new loan, and a new $40 charge for borrowers, will add to the student debt burden, likely increase repayment times, and reduce the effectiveness of the voluntary repayment bonus.

The Inland Revenue Department’s regulatory impact statement states that the proposed changes are occurring at the same time as the student loan computer redesign. Therefore, there are no additional administrative costs. Why, then, charge new fees? Why, then, increase the fees if, in fact, costs are reducing?

Many students and graduates who are struggling with debt, high living costs, and increasing fees are sceptical of these new charges. We heard in the select committee from student representatives that many students and graduates who are facing these additional fees will be cynical of this new tax, as they see it.

Although we acknowledge that this Government has not reintroduced interest on student loans in this term of Government—although National has not ruled it out, should it be successful in achieving a second term—these new administrative fees are essentially interest by stealth. Interest-free student loans are hugely popular because they reduce the debt burden, make repayment easier and faster, and, lastly, are a fairer way of going about the business of tertiary education. Gareth Hughes has no doubt that National would reintroduce interest by lunchtime if it could, but overwhelming public opposition means that it needs to look for stealthy solutions.

These new fees will reduce the effectiveness of the voluntary repayment bonus. Those who make a voluntary repayment of $500 will receive a 10 percent repayment bonus of $50, but unfortunately this will just be eaten up by the administration fee. New fees—whether we call them a tax or interest by stealth—simply increase student loan debt, perpetuating the unfair experiment that is crippling a generation with debt.

The second part of the bill that the Green Party objects to is the pay-period change. We believe that the current annual assessment is fairer, especially for those students who earn the bulk of their year’s income over the summer break and will be disadvantaged financially under this bill. Those who are, say, picking fruit or working in a freezing works or local cafe full time over summer, will likely see 10 percent of their weekly income automatically deducted to repay their loan. Yet over the course of the year, if they focus on studying during the academic year, they will be disadvantaged. We are aware that there will be exemptions for this large body of students. However, we expect not many will go through the rigmarole of applying for exemptions.

Lastly, this bill continues the F grade the Government is earning in this portfolio. From capped spending, to discriminating against over-55-year-olds, to capped enrolments, to rising fees, this Government is making it less accessible, less affordable, and, in some cases, downright impossible to be a student in New Zealand. Tertiary education is a smart investment. Australia—remember, we are trying to catch up—is spending $5.3 billion extra over 6 years, and setting ambitious targets, setting a good model for New Zealand to follow.

In conclusion, we went into the Finance and Expenditure Committee with an open mind on this bill, and we support electronic management of loans as a positive step. However, we cannot support this bill in its current form—I guess its final form—as the administrative fees and pay-period changes primarily benefit the Inland Revenue Department at students’ expense.

The Green Party will not vote to increase the student debt burden. The student loan portfolio is currently projected to grow to $14.5 billion by 2014-15. We are saddling an entire generation with crippling debt that could impact on all areas of their lives. It will only get worse, unless we act now. New Zealand needs real solutions to student debt, and this bill is not one of them.

I was expecting some of the members on the other side of the House who have been interjecting freely through the process to take a call on the third reading of the Student Loan Scheme Bill, but clearly only the interjections are required.

I will speak about three or four elements of the bill in this third reading. Labour is supporting the bill. It is supporting the glass half-full rather than the glass half-empty side of the debate we heard from the speaker who has just resumed his seat, Kevin Hague. Some elements in this bill are positive. Moving from a paper-based system to an electronic system is overdue for the student loan scheme, and I have no doubt that the changes being made here in terms of that system will assist borrowers. They will be able to interact with the Inland Revenue Department far better. They will know much more about the balance of their loan. We hope—we are assured—that compliance costs will be reduced as a result of this legislation. And the quality of information will increase.

Many constituency MPs will have been approached over the years by borrowers concerned about aspects of how the loan scheme operates. Certainly I myself, as a borrower, experienced this, and I have also had people come to see me about it when overpayments occur, and when information is not flowing between the Inland Revenue Department and what is now called StudyLink. People under this process will actually have much more control over their own loan accounts, and I think that is a very good thing.

There are some practical steps in the bill that tidy up one or two elements relating to overpayments, interest rates, and so on. Those steps, I believe, are good things, and that is why we are prepared to support this bill. There are also some changes relating to obligations on borrowers who are overseas, and I support that.

I have had my concerns over the years with the loan scheme. I support a lot of what the Green member said about the costs imposed on people who have undertaken tertiary education, but once someone has borrowed from the scheme, I believe they should meet their obligations. That means that when they are overseas, payments should be made in accordance with the law we are amending today. So I support the changes relating to obligations within the law.

I believe problems still exist in this bill, which is about to become law, in relation to the question of the pay-period assessment versus an annual assessment for repayment. I appreciate the changes that were made in the Finance and Expenditure Committee on this matter, and I think they go some way toward mitigating the concerns. I am not sure that the last Green speaker completely covered off the changes that the select committee made. The select committee took on board the concerns that were raised in first reading speeches and by submitters about the impact of a pay-period assessment on someone’s earnings versus an annual assessment, if that person was a student or was to continue to be a student. This provision is needed because a lot of students try to work very, very hard over breaks so that they do not have to either borrow extra money while they are studying or undertake more part-time work during a study period. The changes made by the select committee acknowledge that, and ensure that a wider group of students, who are also borrowers, will be exempt from those repayment changes.

However, that exemption is still available only on application. The student still has to get an exemption from the Commissioner of Inland Revenue. I urge the Government to work with students associations, as long as they still exist, to make sure that students and borrowers are aware of the fact that they can get this exemption. Some of them may not be aware of that fact. They will work very hard in part-time jobs in breaks, and may not know that they are now eligible under this law to be exempt from making repayments. I think the select committee has done a good thing in making this change with regard to students in a holiday break, who, under the current rules, would have to make repayments if they earned more than $367 per week in that holiday break. That now will not occur, but only if an exemption is obtained on application. I urge the Government to ensure that students and borrowers are aware of that change.

Although we supported that particular aspect of the change, it is still true that part-time students and people with irregular incomes will now potentially be caught by the pay-period assessment. Members on the other side of the House enjoy talking about movies such as The Hobbit. It is true that people who work in that kind of industry get large amounts of money at a particular time, but perhaps will not earn over the threshold for a whole year. They will be making payments now on the basis of a pay-period assessment. That presents a difficulty. But I congratulate the select committee on having listened to those submissions. That is why bills need to go to select committees, so that issues like this can be dealt with.

I still foresee some issues relating to moving from an annual assessment to a pay-period assessment. I appreciate the fact that for some people there will actually be benefits, but a number of students who will still need to apply for an exemption, and other borrowers who will not be able to apply for that exemption, will be caught by this change.

The other matter I will refer to has been referred to a number of times in the debate, and it is the question of the new $40 administration fee, which has been introduced under this bill. We on this side of the House are not convinced that there has been a justification for this fee. We have been told by the Minister of Revenue and also in the regulatory impact statement that the cost savings from the earlier part of this scheme are such that we should, in fact, potentially see a reduction in any administration costs relating to this scheme. We have been told that the new computer system will save money in the long term, so therefore the introduction of the $40 fee seems to have no basis other than revenue generation.

It is, in fact, as other colleagues have said in the debate, the reintroduction by stealth of interest on student loans. We know that the National Government would rather have interest on student loans. There is no doubt about that. I am sure that if National is elected to a future term it will look at bringing that in. Politically they know they cannot do anything about it right now, but in reality that is what they want to do. Steven Joyce has pushed and pushed his officials to find ways of limiting access to the student loan scheme, because he cannot do the thing he really wants to do, which is to put interest back on student loans. John Key said he would oppose interest-free loans with every bone in his body. That is where the National Government really stands on student loans, and that is what we see in this bill with the bringing in of this administration fee.

It is a $40 fee. Some members on the other side of the House said we should not worry about a fee that is only $40 per year. But that money still has to be paid back. Up until this bill passes today, students would not have to pay that money. Although we are supporting this bill because of the positive things it does with regard to the management of the student loan scheme, which we do think in the end—we hope—will reduce costs on borrowers, with this clause the costs on borrowers increase. It is very disappointing to see the $40 fee in this legislation. We do believe it is interest by stealth.

But overall, this bill does positive things. When the select committee made the change around the question of pay-period assessment versus annual assessment for repayments, it certainly swayed some of my Labour colleagues in favour of supporting this bill, because overall it does some good. But it still has within it problems around that and particularly the problem with the fee.

I will finish my contribution to this debate in the last minute or so remaining by talking about tertiary education, which is the core of why we have a student loan scheme. I have heard in this debate members on the Government benches talk about how we should not be investing as much money in tertiary education as we do. Well, the truth is that we need to. To me, nothing is more important than education in order for people to achieve their potential.

For New Zealand to achieve its potential we need more people in tertiary education, more people researching, and more people coming up with the ideas that will drive a productive economy. We will do that only if we invest in tertiary education and if we see it as a public good. It is a public good. We all benefit from a more qualified, educated population. We benefit in terms of the services that we get, we benefit in terms of the social inclusion for people who get into education, and we benefit because of the great new ideas that those people have. We must invest in tertiary education for the good of our country, and we cannot afford to have Governments that take money out of tertiary education, because that will limit all of our futures. I believe that investment in tertiary education is one of the most important things that a Government can do. We must continue to invest in our future.

An interesting final point was made by the previous speaker, Grant Robertson. He said that we cannot have Governments that take money out of tertiary education, yet that is exactly what the previous Labour Government did—take money out of tertiary education. It shifted money from tertiary education into the student loan scheme, and those tertiary institutions have been paying the price since, because of those Labour policies. Labour members start waking up now, but it is too little, too late, because Labour does not have a desire for tertiary education or students in tertiary education.

The Student Loan Scheme Bill is good for students because it takes advantage of students being able to manage their accounts online, and that is very important for students who are aware of and use those new technologies all the time. This bill gives them the opportunity to do so.

It is an important bill as well, in the sense that it is part of that reform of the student loan package, a package which meant that there was a limit on the number of students in our institutions, a change which was brought in by the previous Government. That has directly affected the ability of New Zealanders to get into tertiary education.

💬 Grant Robertson: Did National remove that cap?

A cap was brought in by Labour. Members on that side of the House know very well that Labour brought in that cap and reduced the number of students who could potentially go into tertiary education through its student loan programme. So I think, when we talk about this bill, that it is also important that we put into perspective some of the comments made by the Opposition that are completely wrong and do not reflect the reality of the situation.

This is good for students. It is a good bill. It is good for the tertiary sector. It is part of a range of initiatives that the Minister for Tertiary Education has made that have been very effective in building a stronger tertiary sector. We look forward to this bill progressing through the House. Thank you.

I think the mask is beginning to slip on the National side of the House. We are finally starting to see what National’s true long-term agenda for tertiary education will be. David Bennett said that National does not regard money spent on the student loan scheme as money spent on tertiary education. That is a load of rubbish. The amount of money spent on the student loan scheme through interest-free student loans has made a massive difference to over 600,000 New Zealanders who have a student loan balance, and that is not including those who have already paid them off. We on this side of the House believe that spending money to improve the student loan scheme, to lower the cost of borrowing to our students and our graduates, is money well spent because it is money that encourages people to take up the opportunities of tertiary education, to upskill themselves, and to get better jobs. We think it is money well spent and we think it is a great investment in the future of our country.

I want to talk a little bit about the loan scheme itself. Of course, it is worth remembering, when we are debating this quite significant overhaul of the student loan scheme legislation, where the origins of the original legislation started, back in 1992 when National promised to abolish fees for tertiary education but in fact increased them and introduced the student loan scheme to allow people to pay for it, while simultaneously abolishing living allowances for students. Between 1992 and 2001 the number of students getting a student allowance dropped from 86 percent to 36 percent, because of National’s broken election promises back in the early 1990s.

As a result, what we are talking about today with the Student Loan Scheme Bill is over 600,000 New Zealanders who will be affected by these changes to the student loan scheme. The nominal value of student loan balances as it stood at the end of 2009 was $11 billion, and it is forecast to increase to $15 billion by 2015. That is a significant amount of money. But I want to talk about repayment of student loans, which is covered in this bill. When the last Labour Government introduced interest-free student loans, National—spearheaded by John Key, who said he was going to fight the policy with every bone in his body—campaigned by arguing that no graduate would repay their loan and that the time for repayment would massively increase as a result of the interest-free student loan bribe, as National called it.

I notice that the median repayment time for those who left study in 2006—which was of course when interest-free student loans were introduced—and who have remained in New Zealand is now forecast to be 4.6 years. When we introduced interest-free student loans, we were looking at a median repayment time of up around 9 years. So we have seen a significant reduction in the amount of time that it has taken people to repay their loans, and a big chunk of that is because of the interest-free student loans policy. That is something we should definitely welcome. It is something we on this side of the House are very proud of.

There was a lot of debate during the Committee stage about students who work during their summer holidays, and the impact that these changes in this bill will have on them. I am very pleased to hear that provision has been made for students who do their summer holiday jobs and earn a reasonably significant amount of money within a short period of time and then use that money over the course of the term to pay for their studies and their cost of living. There are provisions to exempt them from mandatory student loan repayments. I think that is a very welcome thing. I am concerned, as my colleague Grant Robertson said, that this will rely on them making an application, and I hope that the Government will make that process very easy for students and also make sure that the information is readily available to them. Working during the summer holidays or during the term break in the middle of the year is something we want to encourage students to do, because when they do that, they are earning money that will result in their borrowing less. The more we can encourage students to borrow less, the smaller their loan balance at the end of their study will be, and the faster they will be able to pay it off once they finish their tertiary study. So I think we want to incentivise them for working during their study break, not penalise them. That is really important.

We are talking here about 58 percent of full-time students undertaking full-time work during the summer break. And 64 percent of full-time students undertake regular part-time work during the term. That figure increases to 90 percent for casual work. That provision is very, very important. It would be great if we could get to the point where a student does not need to go through a large series of hoops in order to get that exemption.

When I spoke at the Committee stage I talked about some of the problems with the way the student loan scheme is administered at the moment and how difficult it can be for a graduate or even a current student to get accurate information about their student loan balance. It is absolutely fantastic that the Inland Revenue Department will be able to do something about that as a result of the changes in this bill. That is very important because at the moment the student loan scheme is being administered by two different parties. StudyLink is administering it for the current year of study, and the Inland Revenue Department is administering the historical part, if you like. Those balances, once they are transferred from StudyLink to the Inland Revenue Department, are actually easier to keep track of, but when they are with StudyLink, if someone is still studying, they obviously have two agencies to deal with to work out what the true extent of the student loan is. This bill will make that significantly easier for students by providing real-time information through the Inland Revenue Department where people will be able to look their information up online.

That is good news not just for current students, who will know where their loan is tracking; it will be also be good news for graduates who are overseas for a period of time but want to keep up their repayments. One of the things we want to encourage people to do is to keep up their student loan repayments while they are overseas. It is not a bad thing for graduates to want to go overseas, do their OE, and get some work experience in a different country. We want to make it easy for them to keep up their loan repayments while they are doing that. If they do not get into default while they are away overseas, they are more likely to come back. If someone gets into default on their student repayments while they are overseas, that then becomes a disincentive for them to come back to New Zealand. Making it as easy as possible for them to make their student loan repayments, to check their balances, and to do all those sorts of thing from overseas is really important. Electronic means are the best way to do that. It is a really welcome step for people to be able to log in and check their student loan balance and repayments just as they check their bank balance. I am really pleased this bill provides for that to happen.

I have some concerns that some of this may be paving the way for National to implement the reintroduction of interest, following the next election. National members have not yet made a concrete commitment not to do that. Before the last election they said they would not do it in their first term of Government, yet they have been very silent about whether interest would be reintroduced in the second term of a National Government. I hope they will be very clear with the students and graduates of New Zealand about that, prior to the coming election. We know very clearly that Steven Joyce privately—and around the corridors of Parliament—has said he would like to reintroduce interest on student loans, even if it were at a nominal interest rate. He has been saying that, and it would not surprise me at all if, in a second term of a National Government, that would be one of the things we saw coming through. I am very concerned that this bill may well be paving the way for that.

Having said that, I say that most of the provisions in the bill are pretty good. We oppose parts of it; we oppose the increase of the administrative fee for setting up a student loan. We think that is unnecessary, given the Inland Revenue Department probably ending up saving money out of this, but on balance Labour will vote in favour of it.

I am going to take only a very short call here because a lot of things have been said about the Student Loan Scheme Bill already. What this bill does is simplify the procedures for all those students out there across the country so they can access the information on their loans, and we think that is a good thing. This bill also puts in place mechanisms to recover from those people who do not perform under the student loan contract. That is a good thing. It also puts in place a mechanism where those student borrowers throughout New Zealand and overseas pay some of the costs of the administration of that scheme. We think that is a fair thing. Those $40 annual administration fees will recover a fraction of the $22 million in annual administration charges paid by the Inland Revenue Department. If that turns out to be over-recovery in the future—and the Opposition seems to think that fear exists—there is the ability in regulation to lower the fee in time so it can be cheaper. Also, with the $60 establishment fee that will be paid towards the $17 million that the Ministry of Social Development incurs, there is an ability to reduce that fee in time should that be too expensive. All in all, this is a good bill. It helps put in place a more efficient student loan system. We commend the bill to the House. Thank you.

I will take just a quick call—in fact, my only call today—on the Student Loan Scheme Bill. In the debate we have referred to interest-free student loans, and indeed the Government has accepted that the electorate says that interest-free student loans are important. The Government commits to them. But it strikes me that the term “interest-free student loan” is something of a misnomer, because, of course, the loan is not interest-free. It is just a question of who pays the interest. At this stage, it happens to be New Zealand taxpayers. So while they have the burden of paying the interest on behalf of students, I think it behoves the Government to ensure that the scheme is administered well and that the repayment levels are optimal.

That leads nicely on to the second issue that is being discussed today. The problem right now is not whether the loans are interest-free, but whether the loans are paid back. The fact is that at the moment about 45 percent of the loans are written off. Mr Hipkins makes clever use of statistics about the speed with which those who do pay their loans off pay them off, which is true, but the fact is that nearly half of them do not. Many of those people are overseas. So I applaud the improvements in the bill that will ensure that graduates and other borrowers have better mechanisms by which to pay. Like Mr Robertson, I received calls from people overseas who said they would like to come back but the burden of the student loan had become so great that they were reluctant to do so.

The third and final thing I will touch on is the basis of the administration fee, which, as I understand it, was introduced under the Labour Government. Therefore it is not a question of the principle but of degree. Certainly the costs of administering the scheme have improved dramatically, but an annual collection of $8 million to $9 million in fees represents only about 0.75 percent of the total loan base. So I cannot agree with Mr Robertson when he says this is interest by stealth.

Overall, I think this is an excellent bill and I commend it.