Zero percent - redux

Earlier this week, we covered Labour's disappointing response to our report on zero-percent student loans. Other comment round the traps:

Stephen Joyce defended National's continued support for the policy National more sensibly opposed while in opposition:

He says the issue is about trade-offs and the government has it about right.

"There's those on the left that want to give students more stuff and those on the right who want them to pay more for stuff. Our view is that the settings are about right and have broad public support.

"There's a significant subsidy of tertiary students in New Zealand and it reflects about 80 per cent of tertiary costs, which is quite high given there's a lot of private benefit from it, but there's a broad public consensus that government should make a contribution," he said.

The Herald noted that our report has an ally in the Child Poverty Action Group's report, which also suggested considering reinstating interest for better means-testing.

In 2014, the Government's share of the full cost of each student's tertiary education was 71 per cent, rising to about 82 per cent after the subsidy provided by interest-free borrowing is accounted for.

If interest were reinstated with none of the savings going back into the sector with means-tested support, the government's share of the costs of a student's degree would still be substantial.

Rachel Smalley broadly agreed with our proposal:

Studying is never easy. You're always juggling a million things. Money is either tight or non-existent. Always. Is it worse now then when I studied? I'm not sure. I studied in a different era. I paid interest on my student loan and because I knew that debt was accruing-interest, it incentivised me to pay it off. I worked three jobs while I studied because I didn't want to rack up too much debt. I worked in a pub on a Friday night, in a bank one day a week and I wrote for the evening post on the weekends too.

I thought I had it pretty tough back then. It was a struggle. I was juggling work and study, but I survived, and within about three years I'd paid off my student loan -- a student loan that was interest-bearing.

Would I have benefited from an interest-free loan? Of course. That loan would have been paid off earlier -- perhaps six months or even a year earlier. But in hindsight, it did teach me a pretty valuable lesson in life.

Everything comes at a cost. Nothing is free in this world.

And while it will take a bold politician to admit it, the $6 billion decade of debt that we've shouldered subsidising student loans, is $6 billion that would have been money well-spent elsewhere.

RNZ's The Panel discussed it, but didn't really get anywhere. Newshub covered it as well, but suggested there would be little appetite for change.

Chris Hipkins continued to say silly things over on Newstalk:

Labour's education spokesperson Chris Hipkins says spending money on education is never a waste.

..."I'm firmly of the view that if we do a better job of educating New Zealanders, then we'll end up spending less money on the prison system, we'll end up spending less money on the welfare system."

Memories of the bumbling report on Adult & Continuing Education that got Really Big Numbers on the benefits of night courses in Indian cooking by assuming that anybody taking any such course was 50% less likely to commit any crime.

But leaving that aside, surely we do more good in getting at-risk kids into the right kinds of study by taking money given interest-free to rich kids and shuffling it over into better tertiary prep and guidance counselling at schools with a lot of at-risk kids, no?

David Seymour and Jacinda Ardern squared off on it in the Sunday Star Times. David rightly excoriated National for maintaining Labour's policy. ACT's newsletter summed things up very well as well, though it benchmarked the effects of reintroducing interest by reference to the equivalent tax cut. We'd proposed shifting the funding to other parts of the ed sector.

David Farrar agreed with us. The Standard didn't. 63% of readers at the National Business Review wanted interest reinstated.

Read properly, our report is decidedly left-wing. We suggest taking money currently provided indiscriminately to tertiary students, who disproportionately come from richer backgrounds, and targeting the money instead to schools with poor track records of getting kids into tertiary (which will disproportionately be serving kids from poorer backgrounds). Some could also provide means-tested support for tertiary students who are in more need. I'd expect that's best done through debt relief for graduates finding themselves in cases of real hardship, but it could also be used to strengthen means-tested allowances or provide scholarships.

I find it somewhat bizarre that this gets characterised as right-wing, but that seems the simplest way for partisans to divert attention from their party's failed policy.

Crossposted from The Sandpit