I have been getting heaps of questions about Mr Joyce’s announcement last week. He does not seem of a mind to get into any details, so this is what I have been able to piece together. Feel free to get in contact with further questions. I have put quite a few in through the written question system where we have not been able to get other answers.
Is future eligibility going to be four years of allowances or 200 weeks?
Steven Joyce caused huge confusion last Thursday by talking about allowances stopping after four years. This was wrong. It is clear that the change he is proposing is to restrict allowances to 200 weeks. This would equate to five years of allowances for most undergraduate courses. This has acted as the default rate of allowances unless you were doing a “long course”. This includes most degrees, postgraduate and longer courses. If you were doing these courses you were eligible for another 50, 100 or more weeks worth of allowances depending on the length of the course. That is now gone.
If you have used up your 200 weeks already does this mean you will be ineligible for future allowances?
I asked Mr Joyce about a case such as this in Parliament today. He said the “final transitional arrangements will be confirmed in the Budget”, but he did go on to acknowledge that the example I gave (a real one) of a student who had used their 200 weeks already and was in the first year of a two year Masters programme would not be eligible for allowances next year.
How many people will be affected by the allowance changes?
Half an answer today as Mr Joyce admitted 4000 to 5000 postgraduate students would no longer be eligible for allowances. He did not give the number of those who would not get allowances because of the changes to parental income thresholds.
Can the government change the terms of student loan contracts that have already been signed to increase the repayment rate to 12% without the agreement of the borrower?
Sadly, yes. Clause 203 of the Student Loan Act says that the Act will override anything that is in a loan contract. The Act contains the repayment rate, but also has a clause 37(3) that says that if the rate is changed by regulation then that rate is deemed to be the rate rather than the one listed in the Act. So, basically the government can do anything it likes to a loan contract as long as it is in the Act. One small caveat is that, through Clause 20, they do have to inform borrowers of any changes to their loan contracts within seven months of the change. Let’s see if they manage that.
There have been a number of questions about limited full time students and how this effects them, which I am chasing up with the Minister. Will come back when I get the results.
As I said the other day I can not believe that Steven Joyce would make these announcements without more information being available. Its simply not fair on students, graduates and their families.
When will the changes likely come in to affect? April next year or sooner?
“… four years of allowances or 200 weeks?”
Perhaps Mr Joyce is also going to move the universities off their silly medieval calendar then, like every other industry, four years will approximately equal 200 weeks.
Okay, I have another question. He says post-grads should borrow to fund their study. I want to know where he thinks they should borrow from. The maximum living costs you can borrow from Studylink is $172.51 a week, and that’s not enough to live on. Are they supposed to, what, get a mortgage? They don’t have anything to mortgage!
Or, we could simply dismantle the whole student loan nonsense…
I thought NZ was short of doctors?
Are they to study in cardboard boxes on the campus grounds on the back of napkins?
@Matt
I don’t think they are making any changes to the loan scheme. They made those changes last budget. It is the allowances this time. The money students live on.
I thought about adding that word but was too lazy… Maybe people should just yell, Spending = Income = Output.
“Or, we could simply dismantle the whole student loan nonsense”
Interest free loans, or free education, or rich parents for all.
Whichever works for you is fine by me.
The major purpose of the loans is to lower the general
tax burden (cost of education of tax revenues) in requiring cost repayment by students (user pays), the national benefit is in the use of the scheme to retain skilled workers via interest free status to those staying here to work (and otherwise debt writeoff to retain in demand workers in health etc).
The limitation to 4 years of allowances could well result in more undergraduates finishing their study offshore.
The same students eligible for the student allowances often have to work part-time while studying and thus fail some of their courses because of workload pressure. That with onerous debt repayment is going to lead to many to review further education as an option. They may go straight to Oz for the better paid job, seek residency and then go to university under their better repayment arrangements.
“Interest free loans, or free education, or rich parents for all.
Whichever works for you is fine by me.”
Yep… Pushing the [DEL] key never felt so good. Entries into a ledger that are meaningless. Did you ever ask yourself how interest free loans “pay” for anything? It’s a tax on higher education, no more, no less… The sad fact is it strips spending (10%) from the economy for no purpose at all.
What does Steven Joyce think will happen to student debt levels with these announcements?
This government likes to say that it is very concerned about debt but the suggestion that Steven Joyce makes to people no longer eligible for allowances, is to borrow!
On top of that, they’re removing the early repayment bonus which they introduced and trumpted so much.
So that’s no rich parents for everyone, no interest free loans or even no loans at all.
Have to say, the future doesn’t look bright down your alley, Matt, but go on, I’ll indulge thee.
How would you have students pay for their further education?
**Law Geek Alert**
Acts of Parliament contain sections … so it is section 203, etc. Bills have clauses.
**Alert Ends Here**
I’m so confused. Does “allowance” mean “loans”?
I didn’t use an allowance when I completed my first degree (took 4 years) – I actually worked my ass off to not borrow more than I needed and then payback my loan in the 2 years since I finished study. I’m not a fan of debt. But I was always planning to get the debt sorted on that degree, and then go back and do my masters. If I haven’t used an allowance in the first 4 years of my study, would this mean I would be allowed to use an allowance for the next 4?
Side note: this is bull crap. Talk about punishing those who play by the rules. And in what world do they think one degree is enough in today’s job market? Post-graduate study is essential – they have to know that. Absolute bull crap.
Affects*
They wouldn’t, the govt would by crediting bank accounts, how govt “pays” for everything… But I would be raising the bar and removing most of the unneeded admin side form unis.
No acknowledgement of what this will do to Kiwisaver, the increase to 12% repayments will mean I have no choice as the sole income earner in my household but to stop saving for my retirement. I graduated in 1996 after having compound interest on my student loan every year since I started my degree in 1992. According to IRD I have already repaid the original principal and 200% of the original amount in interest. I have another approx $8000 to pay and by the time it is fully repaid, I will have paid back the principal and 300% of the original amount in interest.
I have put off having children because of my loan and am swiftly coming up to be 40. My fiance and I can’t afford to save for our wedding because of student loan repayments. This is just an extra tax on graduates. Give us a break for crying out loud Mr Key…
Those that have degrees, but have lost their jobs over the past couple of years and wanting to return to study as their “up skilling”, will be hit with the allowance restriction.
All those that have degree, but no job will not want to go back to study in their existing field or a new field if they can’t get suitable support.
We live in an age where we are expected to face changes in our careers more frequently than before, yet we have more restrictions and less support to those that wish to take on study so they can find higher paid work again. You can’t easily switch a job these days without holding a different degree as a ticket to a job, and the allowances make it easier to take on a new field of study if little opportunity exists in your existing field.
Limitations on allowance duration needs to take these types of career changes into account.
Now teachers are required to do postgrad, but depending on the length of the batchlor degree is wether or not they can actually able to complete their study?
I still ask what about the doctors, the dentists, the vets, the teachers and of course, the zoology students! What about them?
What is going on?
Just got an email from IRD which down the bottom says this
“Annual administration fee
A $40 annual administration fee will be charged on your account if your loan balance is $20 or more, unless you’ve paid StudyLink an establishment fee in the same tax year. ”
A new fee! So loans remain ‘interest free’ but cost $40 a year. Awesome. Wonder how long it will stay $40 pa ? Nastys have stealthed that one in. Guessing it’s going to increase steadily over the next few years. Wonder if it will be added to loan balance? Or will the first $40 we repay each year just go to that?