Student loan rebuild plan 'offensive'

Sir Paul Callaghan with Prime Minister John Key. Photo / Steven McNicholl

Two Hong Kong-based New Zealand graduates have slammed the suggestion overseas graduates should pay back outstanding student loans to help finance the Christchurch rebuild.

In an open letter to the 85,000 graduates with outstanding student loans living abroad, New Zealander of the Year Sir Paul Callaghan yesterday urged students to repay their loans, in particular the 35,000 Kiwis abroad who are behind in their repayments.

With an average debt of $17,900 overseas graduates owe $2 billion - "30 per cent of the $7 billion that New Zealand taxpayers will have to contribute through the Government's contribution to the rebuilding.

Sir Paul said those who repay their loans will be "acting heroically".

But Hong Kong-based New Zealanders Paul Allen and Hannah Belcher emailed Sir Paul doubting offshore student loan repayments would have any impact at all on the rebuilding of Christchurch.

"Approaching New Zealand's poorest and most indebted demographic for a hand out is not appropriate. This embarrassing appeal not only reeks of the bailiffs, it is even more offensive in that it attempts to hide among the wreckage of a natural disaster in which people lost their lives," they wrote.

"Indeed, Sir Paul seems to all but admit that the student loan book is a poorly performing asset, considering the emphasis he gives to the number of apparent defaults. The Government may wish to consider selling the loan book at this point to raise funds for reconstruction."

Mr Allen, a graduate from Canterbury University, and Ms Belcher, a graduate of Victoria University, have both paid off their loans.

"I scratched and saved and lived with my parents and got through four years debt free," Mr Allen wrote.

"As Sir Paul Callaghan readily admits, his education was free. Does he stand ready to lead by example, and pay what his degrees would've cost, adjusted for inflation and interest to give us a 2011 figure? As the holder of a doctorate in physics, he surely owes his country a substantial debt. And if not Sir Paul, what about all those other baby boomers who enjoyed a free education?

"Perhaps if young New Zealanders didn't have such crippling debt from their education and such miserable prospects for employment and home ownership, they would not have been forced offshore in the first place.

"And then encouraged to remain offshore, as the compounding interest on their debt, the upward march of the property market and the stagnant pay made returning home even less attractive. Let's not forget, it was market forces that saw the introduction of student loans. It is churlish for those responsible for the policy to now complain that those same market forces have resulted in a large capital outflow."

While other emails sent to the Herald reflected this view, others were disgusted students were able to leave the country with outstanding student loan debts.

In a response to Mr Allen and Ms Belcher's email, Sir Paul, a physicist who was knighted in 2009, acknowledged the pair raised "interesting ideas" but sought to clarify his position.

Sir Paul said while he did not have a loan when he studied, he did have fees - around $150.

"That's equivalent to about $2000 per year by today's money. I worked from 5am to 8pm in the freezing works right through the summer for five seasons to put myself through university. My parents were unable to support me. And in those days people paid 66 cents in the dollar marginal tax, just as I did for 20 years after graduating. So it was a different world.

"The world has moved to lower taxes and more user pays contributions. Is that fairer or not? I don't know. So no, I don't feel guilty about the world I lived in, when only 1 or 2 per cent of young people went to university."

Sir Paul said he appreciated some would ridicule the idea, many think it is great, and asked people get some proportionality around the issue.

"The median outstanding loan is about $18,000. That's not a fortune for anyone in employment. Mortgages exceed this by factors of 20 or 30.

"Our overseas graduates are not our poorest and most indebted. Christchurch and New Zealand is full of seriously poor people for whom the idea of travelling and living overseas is merely a dream."

Sir Paul has started the Heke project - Heroic Educated Kiwi Expatriates - to encourage overseas graduates to pay back their student loans.