Labours Student Loan Bribe

Ah, student loans. There's a topic that has been close to my heart. I read in the paper this morning - whilst waiting in the dentists - that Labour plans to bribe students with $300 million with their proposed changes to the student loan scheme.

• No interest on any student loan for New Zealand-based graduates from April 1 next year
• Overseas-based graduates not in full-time study continue to pay interest
• Interest "amnesty" during 2006 for any expatriate graduate who returns home
• Current capped student fee system maintained
• Personal and parental income thresholds for student allowances to be progressively increased
• Funding arrangements for medical and dental students to be reviewed
• Cost: $100 million initially, rising to $300m by 2008-09

Oh, and before I get distracted back to loans, I found this throw-away quote in the article: -

A spokeswoman for Cullen said that Labour, if re-elected, would initially take the money from a $1.9b contingency fund Cullen had allowed for new spending promises.

Only $1.9 BILLION? Anyway, the proposed changes to the loans scheme are bollucks. If there is no interest, then I will be going back to university part time to get an interest free loan to invest. Thats what I did when I was at university and the loans initially had the interest wiped off whilst you're still studying. By the time I left I had over $30k invested and was reaping a handy 8% or so. I guess one good side is that it allows capitalists to cut their teeth early. I do like the idea that if you bugger off overseas you have to pay interest - that does sound reasonable. Even more students would head overseas if there was no interest because not only would they pay it off quicker, but they would start saving sooner.

Anyway, to my point. Studying, like many other activities, must come at a price. There has to be very real costs associated with it to ensure that people don't study just for the hell of it, or go and get arts degrees. Degrees are largely for working and earning. It's like starting a business - you have to invest money to eventually make money. Student loans must have an interest rate - and it can't be too far below market rates otherwise you open interesting investment opportunities.

As always, what's the solution? Leave the student loan scheme mostly untouched, and reduce tax rates instead. Reduced taxes mean graduates have more in hand and can pay off the loan sooner, its also fairer on those that choose not to study and work instead.

Labour just doesn't get it, tax cuts are the simple cure to so many of our ills, but they refuse to consider it. I just hope that National is up to it when they release their policy.

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