Student Loan Scheme Amendment Bill (No 3)

Part 2 of this bill, the Student Loan Scheme Amendment Bill (No 3), makes a series of amendments to schedule 3 of the Student Loan Scheme Amendment Act 2013. That is right. The Government has to amend the legislation it passed last year because it got it wrong again when it comes to student loans. Part 2 of this bill amends schedule 3 of the Student Loan Scheme Amendment Act 2013.

This is one of the problems that students have with the current Government—its constant tinkering and mucking around with the student loan scheme yet not actually getting to the heart of the issues that lie within it. For instance, this part talks about borrowers who are shareholders in close companies, those who are involved in trusts, and people who have employment benefits—and I will come back to that particular provision in a moment—none of which actually addresses the real issues that are involved in the student loan scheme. The biggest one is that at the moment the living costs component for student loans is $173 a week. Well, in Wellington a whole lot of students are arriving in town right now, and very few of them will find accommodation that costs them less than $173 a week. If they add in their bills, if they add in anything to do with food, it is gone. They cannot meet those needs through the current living costs arrangements of student loans.

Steven Joyce stood up in Parliament today and said that postgraduate students who have lost their allowance because National abolished it can just borrow from the student loan scheme. Well, the reality is that they cannot afford to live on that. Many of those people who got the student allowance—for instance, for the clinical psychology course that was raised today—are parents who were earning around $350 a week off the student allowance system to help bring up their children. They are now being asked to live off $173 a week and they cannot, so they are giving up their study. That is the impact of the changes that this Government has made to student loans and student allowances.

Rather than tinkering around with schedule 3 of the Student Loan Scheme Amendment Act 2013, this Government could be coming to the House with a reform of the student loan and allowance system that actually works in facilitating people into study.

💬 Paul Goldsmith: Ah, the solution: more money. More money.

Well, no, Mr Goldsmith, it does not necessarily have to be more money. More money would be useful. How about this, Mr Goldsmith: how about cracking down on the kids of parents who put all their money into trusts so that they get an allowance, whereas other people from working families who do not have the money to pay for an accountant do not get a student allowance? How about coming to the House with a bill that does that? How about coming to the House with a bill that actually says to people who have lost their jobs and who happen to be aged over 55: “We are going to support you into retraining.”? But, no, what this Government did was it said: “People over 55, you are not eligible for the living costs component of student loans.” I have had people in my electorate office in tears because their ability to retrain and their ability to get a job that will sustain them through to their retirement is gone under this Government.

Every step of the way the National Government has undermined the student loan and allowance scheme. It has said: “We don’t want people in tertiary education. We want to limit the number of people who are involved in tertiary education, and we are going to use the student loan and allowance schemes to do that.” Well, I think that that is just plain wrong. It is short-sighted and it is selling young New Zealanders short. It is selling people who are retraining and those who have lost their jobs short. This bill could have been a bill that said: “Yes, we’ll make it easier for people to repay their loans. Yes, we will support people, through student allowances and through access to student loans, so that they can achieve their potential.” Instead, Part 2 of this bill is simply tinkering around with schedule 3 of the Student Loan Scheme Amendment Act 2013.

One aspect of that is the aspect around the question of income from employment benefits. I will credit Tracey Martin for raising this in her second reading speech, because although on the surface it makes it look like we are dealing with a benefit like a motor vehicle that somebody might have as part of their job, if part of their job involves travel, they often are not recompensed for that beyond a mileage rate, perhaps, if they are lucky, and here we are throwing that in to people’s income. It is already hard enough for people, having had the Government increase the repayment rate from 10c in the dollar to 12c in the dollar. It is already hard enough for people who have not had a wage rise under the 5 years of this National Government, without imposing these kinds of things on them.

The Student Loan Scheme Amendment Bill (No 3) is nothing more than a bunch of window dressing and slogans put together in a bill, and now some corrections to a bill that was passed last year. Students all around New Zealand are starting off their courses at universities and polytechs and other training institutions at this time of the year. They are looking at how they are going to finance their way through their studies. If they are over 55, if they are over 40—for student allowances—if they are a postgraduate student, or if their parents’ income has shifted at all in the last few years, they are worse off under a National Government. It is more difficult for them to study, and students end up taking on more and more hours of part-time work in order to just get by. The amount of $172.50 a week is not enough to live on under the living costs component of the student loan scheme, so what do students do? They take on more part-time work. What does that do? It has an impact on many students’ study and their ability to actually achieve the results that they should.

The interest-free student loan scheme is not a system that the National Government is committed to. We know that. John Key said he did not believe in it and that he was going to oppose it with every bone in his body. As a result of not being able to have the political will to stand up for what National actually believes—that it wants to put interest back on student loans—its answer, because it is not prepared to do that and because it does not have the guts to put that before New Zealanders, is to tinker around with the system through bills like this, which makes it more difficult for New Zealanders to repay their loans if they are overseas. Let us be absolutely honest about this. This bill will make almost no difference to the repayment rate for student loans. In fact, the evidence that the Finance and Expenditure Committee saw was that it actually is going to be harder for people to pay back their loans. They will actually pay back less of their loans. They will not come back to New Zealand.

So, as a bill, it does not even achieve the purpose it set out to. It is a bunch of slogans. Part 2 of this bill adds absolutely nothing, other than correcting a hopeless mistake of this Government, which clearly does not know what it is doing with the student loan scheme.

It is my pleasure to follow the previous speaker, Grant Robertson. I am intrigued because I hear all the Opposition spokesmen saying that the Opposition is not opposed to the idea of people paying back their loans and being obliged to pay back their loans, but it just seems that those members never happen to agree with any of the ideas put forward. The approach of the Labour Party seems to be that if we talk to people and we ask really, really nicely, then perhaps they might pay back their loans. Well, it does not work that way, and it has not been working that way, and that is why this legislation has been brought in as a very last-ditch measure. If you have one of the 61,000 New Zealanders overseas who have got student loans, who have left the country, and who are not paying back their loans, and if you have exhausted all other opportunities to get them to start paying back their loans, then this Student Loan Scheme Amendment Bill (No 3) gives us the tools that we need.

Do we really think that the hard-working factory workers on modest wages should be paying taxes to pay for highly trained overseas people who have bunked with the cash and are not paying back their loans? Well, then, I think that is why the Labour Party is a bit out of touch. It was interesting to see also the previous speaker, Mr Robertson, suggesting that we do something about people hiding their money in trusts so that they could get student allowances. Well, you know, we actually passed legislation that broadened the definition of income of parents for student allowances and for student loans. We have been doing that, and we will continue to work in that area.

It is a long, slow process because it does take, and it will take, decades for New Zealanders to wean themselves off this entitlement culture that has developed: the idea that somehow every solution to every problem we have got in this country is that we just need more money. Mr Robertson was a perfect example of that in the previous speech. The solution to the problem is just more money. That is what we need to do: have more money to spend on student allowances and student loans. Well, there are not necessarily endless supplies of more money. New Zealand has to fight its way and be competitive in a global world that is competitive. We get to spend resources on education and on tertiary education and on supporting students only if we have a strong economy, and we have a strong economy only if we are disciplined about the way that we spend our money. That is why this Government has been successful by having a disciplined approach to spending, getting back to surplus, and doing a good job, and it is why we continue to have the same levels of support that continue. It is why Labour is, I think, struggling to get attention and traction, because it is all about spending more.

Just dealing with some aspects of Part 2 that I wanted to draw the attention of the Committee to, in terms of the new arrangements in terms of paying back loans, previously, yes, we do have overseas-based borrowers’ repayment obligations—

💬 Kris Faafoi: Bring out the formula!

—being based on their loan balance while New Zealand - based borrowers’ obligations are based on income. I do not want to confuse the Opposition by dealing with the mathematics, because I am sure that not all of them are so good at mathematics, but what I would say is that if there was a perfect way of figuring out what the income of overseas people was, then that would be a sensible way of doing it, but there is no practical way of doing that, so the loan balance is what we are using here. This bill extends that. At the moment a balance of over $30,000 has the obligation to pay $3,000 a year. Now that obligation for loans of between $45,000 and $60,000 will be to pay $4,000 a year or $5,000 a year, respectively. If people on the other side think that it is unreasonable to ask New Zealanders who have a loan of more than $60,000 that they have not paid back to their fellow New Zealanders that they start paying back that money, then I think they have got a serious problem. Thank you.

David Clark.

💬 Hon Members: Oh!

That vote of confidence from my colleagues is welcome. Of course, everybody wanted the opportunity to speak after that purler from Mr Goldsmith. There was quite a lot of competition on this side of the Chamber to draw attention—further attention—to the speech that Mr Goldsmith has just made. Mr Goldsmith just told New Zealand students that they need to wean themselves off their entitlement culture. If people at home heard that, Mr Goldsmith said that it would take a lot longer than 5 years for them to wean themselves off their entitlement culture. That is Mr Goldsmith’s O-week message to the students of New Zealand. Students need to wean themselves off entitlement culture. [Interruption] What was that?

💬 Grant Robertson: It’s an entitlement they have to pay back.

It is an entitlement they have to pay back, Mr Robertson points out. This, of course, is a boon to members on this side of the Chamber because it points towards the very difference that we are debating here. We have in this Student Loan Scheme Amendment Bill (No 3) encapsulated National’s punitive approach towards students. Those members do not like the interest-free student loan scheme. They never have. They introduced the scheme with interest, and then Labour introduced the interest-free scheme, and, of course, subsequently, National introduced some administrative fees as a substitute for an interest charge because it could not get away with putting an interest charge back on.

It is O-week, so I am hoping that those students at home are not out doing other things like toga parties and the other culturally enriching things that students do during orientation week but are at home reminding themselves of the stance of Mr Goldsmith and that message that students need to wean themselves off entitlement culture.

Mr Goldsmith lives in a world where this is, in his view, free money—this is free money. It is wrong that students are given loans—loans—to better themselves, to better their lot, and to better the lot for their family and the communities around them. I think we just need to watch Mr Goldsmith’s speech again. I am sure that other colleagues will comment on it as well, but I will come back to some material that is actually in the bill. I can see colleagues are wanting to share Mr Goldsmith’s messages on Facebook, and I urge students to watch his speech.

In a previous life I ran a university college down in Otago. I am very, very aware of how much some students struggled to meet the payments that were required of them not just in the college that I was running but in other similar colleges across Otago, and that is in a place where the cost of living is somewhat lower than in other areas in the country. The reason they struggled is that the fees that are charged just to live reflect the real cost. Obviously, a college can buy in bulk and get some discounts and can do things cheaper, perhaps, than an ordinary citizen could do them, but they still cannot be low enough and affordable enough to meet the kinds of demands that students have placed on them financially. A student who works 40 hours a week, for example, in a minimum wage job throughout the whole summer holiday is going to really struggle to pay the deposit at the beginning of the year for a hall of residence in New Zealand. That is the way our country is structured. The wages are kept low by this Government. It has had only tiny incremental advances in the minimum wage. It has also got to do with the costs of tertiary education and the lack of generosity in the student loan scheme. This is what Mr Goldsmith calls an entitlement culture: the ability to eke through. The ability to eke through on borrowed money is what Mr Goldsmith is calling an entitlement culture.

We on this side of the Chamber view education as an investment in our young people, and we note that the changes proposed in Part 2 of the bill really look at the minutiae of how the formula will apply to those who are shareholders in close companies, those who use motor vehicles, and those who have voting interests. These details are important, and they are important to get right to make sure that the system itself is fair, but they do not get to the heart of the issue, which is about generosity, and we do not see that so much covered in Part 2 of the bill. The formula, of course, is laid out there. Mr Goldsmith seemed to be occupied with Part 1 of the bill, and we noticed that he talked about the repayment amounts for those arrested at the border, but, coming back, we see that Part 2 actually has a formula that adjusts for net income in the income year and it is calculated using a formula that looks like a mathematical formula—“a x (b - c)”. That formula is applied in different ways, according to the voting interest, the nature of the company that is held, the dividends paid, and so on.

These are important details in respect of fairness in the system, but I will come back to the point that Mr Goldsmith raised about an entitlement culture. I simply cannot take that comment seriously, and I think that few New Zealanders will. Any New Zealanders who have studied will struggle to take that seriously. It might come from someone who ran and lost in Epsom with a particular world view that they were promoting that thought that Margaret Thatcher and Ronald Reagan were good but did not go far enough. It might come from that particular world view that this is an entitlement culture, but we on this side of the Chamber view those who borrow to better themselves and who want to repay that loan as doing a good thing for themselves and for society, and we believe that this loan scheme is a good thing. That is why Labour introduced the student loan scheme in an interest-free format in the first place—so that we could have this paying forward to each generation this money that would better our society over time.

I want to take a minute, just as I reach the end of my time speaking, to give a special welcome—a shout out—to the students arriving in Dunedin North, the finest electorate in the country, at the oldest and finest university in the country. Those students are very welcome in Dunedin. It is great to see their energy returning to the city. We are proud on this side of the House to support students, to support the interest-free student loan scheme that we introduced, and to support more generous allowances over time, working towards making education more and more accessible, not like the changes that this Government has brought in, restricting the number of years that students can study. We see students coming in to my electorate office who are studying medicine but have now had their funding discontinued. They cannot complete their medical degrees, for goodness’ sake! We have students who have undertaken a Master’s degree put off drawing down their payments because they have children and were relying on the payment in their last year to get them through, who now find that they have used up their allowance availability and who are now stranded, unable to complete degrees.

We see a Government here that is restricting access to education in every way that it can. It is making sure that its own people are looked after, but it does not care about most of New Zealand—the greater part of New Zealand society that is struggling to get ahead under a Government that really does not seem to have a plan to share the benefits of any recovery we are seeing, a Government that is out of touch with New Zealand, and a Government that does not seem to care about our students. On this side of the House we say: “Welcome, students. Welcome to Dunedin. Have a great time. Make the most of your educational opportunities. We support you. We support you with interest-free student loans and student allowances. We on this side of the House support you. Don’t elect those guys again. They are looking for opportunities to take opportunity away from you.” On the other side of the House, those members are interested in preserving the capital, the people who have the wealth. They are not interested in seeing people progress up the ladder to make themselves better and to make their families better and to increase their opportunities. Those members are against progress. They are for only entrenched interests. We support ordinary New Zealanders who want to get ahead. That is why we support the student loan scheme in its interest-free form, and that is why we support student allowances that are generous. We in the Labour Party say: “Welcome, students. Great to have you in town.”

Kia ora, Mr Chair. I just acknowledge how great it is to have the author of the Student Loan Scheme Amendment Bill (No 3) in the chair next to you. Hopefully, he will have seen my contribution earlier on Part 1 and the questions that I asked, and perhaps the Minister of Revenue may actually rise to his feet during Part 2 and answer some of those questions.

I also want to address in Part 2 the concept of fixing what was the bill from 2013 and the moving around of some of the parts inside the schedule there. I want to bring this conversation out of the 20 percent of our young people who go to university and actually talk about the 60 percent of our young people who are currently in the workforce or who are trying, through education, to gain employment. I want to talk about the fact that it actually costs a baker $5,000 to do a pre-apprenticeship course, and he or she has to gain that through StudyLink. I want to talk about the fact that it costs an animator $10,000 a year to actually go and do that at a polytechnic. Let us just go to actually even doing an early childhood education qualification inside the workplace run by a wānanga or one run by another polytech organisation. That will cost you $1,800 via StudyLink.

What about inserting, as we are working around schedule 3 in Part 2, some sort of responsibility on behalf of the lender, Minister, to make sure that the young people who go to StudyLink understand the repayment obligations? If you go to StudyLink now, to the applications web page, which I have here for you, should you wish, it will tell you every way under the sun how to gain a loan and gives not a single comment about your repayment responsibilities at all. There is not a single comment on that front page about the repayment responsibilities of any young New Zealander. It is no wonder we now have outstanding debt. As a debt collector, as a Parliament, we have put into place, or are looking at, legislation on loan sharking in South Auckland where we say that a loan shark, a lender, must make it clear inside the documentation the repayment obligations of any individual who is borrowing money from them. Where, inside any of this legislation, inside the rewrite of schedule 3 in Part 2, has this been made clear?

I meet young people day in and day out in my town. I met a young person the other day who has an $18,000 loan to study animation. He had no idea he could not leave the country. He had no idea that he did not have to start repaying his student loan until it was over a certain threshold. He had no idea it was interest-free. He had no idea that if he left the country, after 1 year he would get interest on it and that he had to make contact with the Inland Revenue Department. Why did he have no idea? Because there is a multitude of people out there who are signing our young people up to debt, and, it would appear, there is not a single requirement for those people to make sure they know how to repay it. It might be something that the Minister could work on, so that it is clear before our young people sign up.

I am tired of hearing about the 20 percent at the top. Certainly, university students have loans. There is no doubt about it. But so do many of the other young New Zealanders in that 60 percent bracket. They are not the most vulnerable. They are not the ones receiving free support. They are the ones in the middle who are trying to find employment and who are doing what we have asked them to do. They are not getting a degree. They are not getting a Bachelor’s degree, or whatever. They are doing a pre-apprenticeship course, or whatever. It may be that the Finance and Expenditure Committee is not aware that if you have National Certificate of Educational Achievement level 1, and the majority of New Zealand students, interestingly enough, do have level 1—it is level 2 that is the target—you cannot gain entry to a Youth Guarantee course. So you must get a loan. You must go in. Only 1 percent of all the people involved in a Youth Guarantee course are allowed to already have level 1. The majority of the level 1 courses do not cover baking, do not cover animation, and do not cover other things.

The reality—and this goes to new section 12A, inserted by clause 17, put in, in Part 2—is that that includes a car now being incorporated into the salary package of any worker. Again, I believe that this provision has been written in there because there is a bias that all the people with these loans are university students or post-university—that they are all doctors and lawyers, or whatever, and that they are on $110,000 a year, plus a Mercedes. I brought the case before of a Department of Conservation ranger who I believe can expect to earn between $33,000 and $47,000 a year, depending on approximately 5 years’ worth of experience. Often there is a car involved in that. I do not think anybody sitting in this Chamber is going to say that $33,000 plus having a Range Rover, or whatever those things are—a Land Rover, or whatever it is—to use as you go out to make sure that all the bins in a regional park are clean, or whatever, makes you a wealthy person.

New Zealand First has serious concerns that there has not been a practical eye cast over this bill. This has been written with a bias. It has been written with a bias, and when it hits the ground it is once again going to disadvantage all those who are in that low or middle-income area. This is not going to target the people who somehow Mr Paul Goldsmith thinks are the people who need to be pursued like this. It may be that in Mr Goldsmith’s electorate—well, not actually the electorate he is the MP for but the electorate that he lives in—they have all got $150,000-a-year jobs and drive a company Mercedes. But I can tell Mr Goldsmith that where I live in Rodney, which is 46 percent of the land mass of Auckland, with social deprivation scores of 8 in two of our townships, those young people are getting jobs as Department of Conservation rangers and they are getting jobs at $33,000 a year. They have got a car placed at their disposal, for them to do their job. They will be penalised further, through this new section, because it has not been well-thought-out, like the majority of the rest of the bill.

Earlier in the debate this evening Parliament was subjected to a tirade of very poor sloganeering by the member David Bennett. The thrust of his argument was, essentially, that Labour supports some intellectual elite—the group of people who actually study and go to university—and National supports somebody else. I am not quite sure who he was trying to say National supports. I do not know—he was trying to do some sort of framing around Labour as being intellectually elite. But I heard somewhere in his tirade something along the lines of: “They’re the real people who pay their taxes, like people who work in agriculture.” Well, Mr Bennett, I want you to know that a large number of the people who live in my electorate in Palmerston North are people who are going to make their living working in agriculture. They are studying, getting degrees, getting Master’s degrees, and doing postgraduate study at Massey University. So a lot of the people whom David Bennett decided to attack this evening—a lot of the people whom David decided to attack this evening—are people who are going to be working in the very industry that those members over there pretend to be the champions of.

But do you know what? There is a group whom I want to talk about this evening who have been even more abused by the changes that National brought into the student loan scheme, which Part 2 of the Student Loan Scheme Amendment Bill (No 3) attempts to tinker around with—that is, the eligibility for student allowances. Another group of people who study exclusively at Massey University are vet students. A veterinary degree takes 5 years to complete. That is somewhat more than the 200-week maximum that you can take a student allowance for. So, right from the start, anyone who embarks on a veterinary degree is not going to be eligible for a student allowance for the whole time that they are studying for a vet degree.

But it is worse than that because not only do they have to do about 250 weeks of study, or maybe slightly less than that, but also they have to work over the summer doing placements that are credited towards their study. Those are absolutely compulsory. There is no way out of doing those placements over the summer. The good news for them is that they can get a student allowance whilst they are doing those placements over the summer, but, of course, that eats into the 200 weeks. So for most vet students, they are facing at least a year of their study without the student allowance.

But it is even worse than that. These days, because the competition to get on to that veterinary course is so intense—the places are so few—a large number of students have actually completed an entire qualification before they start their veterinary degree. So vet students, in particular, are very heavily penalised by the National Government’s decision to limit the availability of student allowances.

Qualified veterinarians are absolutely vital to New Zealand’s primary industries. New Zealand’s agriculture—our dairy industry, our beef industry, our lamb industry, our alpacas; anything you want to name that is an animal that is vital to our economy—absolutely depends on high-quality, qualified veterinarians. Yet that is one of the groups that that National Government—of all parties to attack a group that is so important to the primary industries, it is the National Party that has made it so difficult to go and get a veterinary qualification. Maybe—maybe—the National Party believes that only the sons and daughters of immensely rich people deserve to be vets. Maybe it believes that if you grow up in South Auckland, you do not have a right to be a veterinarian. Maybe that is why it decided to put that barrier up to stop people being able to qualify as a veterinarian.

I think that it is rich coming from a member like David Bennett, who tries to throw slogans around about what one party or another actually believes, when that party comes to Parliament day after day and says that it is the champion of agriculture. It says it is the champion of the primary industries, and yet in so many ways it makes it more difficult for the people who are working day in, day out on the front line in the primary industries.