The cost of debt-free education

By Julie Cleaver

When Labour announced its new free tertiary education policy in January, the nation split in two. Student Julie Cleaver wades into the debate

On one island people hugged each other and rejoiced, believing that debt-free was the way to be. On the other people spat out their triple-shot lattes in disgust, insisting there were better ways to spend such a monstrous amount of money. Or that Labour was just buying votes, like they always did.

Although each island had a solid argument, both made one crucial mistake. From what I could see, both parties forgot to ask any students or potential students what they thought of the idea. They probably assumed it would be unnecessary. After all, who would say no to free stuff?

So what do current and potential students think of this idea?

As a student myself I initially Congo-trained my way straight over to party island. What a good idea! I thought. Now people of all economic backgrounds can have access to education without worrying about debt! I daydreamed about countries like Germany where they offer free education to not just their own citizens but the entire world, and I wondered if New Zealand was heading down that wonderful track of equality.

Then I started digging a little deeper. Germany is a "sozialstaat" (social state) and they're taxed much higher than we are. On average we pay around 30 per cent tax and they pay about 50 per cent. So their economy is able to support extremely expensive and progressive policies, but could we? Or in a few years would we be drowning in debt?

Then along with the latte drinkers, I started thinking about other ways this $1.2 billion a year could be spent. Child poverty, unclean rivers and oceans, and a shortage of affordable houses are all issues that I believe are far more pressing than students not having to pay back an already subsidised and interest-free loan.

On the other hand, the thought of having a loan deters a lot of people from studying. I asked 14 young people who chose to not go to university if having a loan impacted their decision and all bar three said yes. Michaela Loye summed up the general argument: "I would have loved to study psychology but the thought of having a loan loom over me for a great period of my life, and the fear of possibly not being able to travel due to the increase in interest, was not a stress I wanted to take on."

The last point Michaela mentioned is interesting. According to the IRD, if a person leaves New Zealand for more than six months their loan will start racking up interest. Unsurprisingly this point was raised a lot. Young people often dream of going away for their big OE, but becoming plain broke just doesn't fly with them.

However some people, particularly those on anti-free-loan island, would argue that young people choosing not to study is a good thing. Isn't this country already flooded with graduates?, they would say. Don't we already have too many educated people working in cafes and fast-food joints? This is a relatively bitter but important point that needs to be addressed - why have free loans if we don't want more grads?

First, I think it is worth mentioning that Labour's new policy would include free fees
for apprenticeships and trades. As there's a shortage of tradies and an increasing number of houses that need building, making practical training free would likely be very constructive for New Zealand.

Second, uni graduates make decent money, which is good for the economy.

A recent study from Universities NZ discovered that uni grads made $1.6 million more over their working lifetimes than people who didn't study. Times that by however many graduates there are, and that's quite a lot of money for our little country.

Then we need to look at how education benefits individuals' lives and society as a whole. One study called The Benefits of Higher Education found that societies with highly educated people were basically better in every possible way.

It also found that individuals with a uni education had better health, more life satisfaction, and even lived longer.

Based on that information I think the more people who study, the better. Although a lot of people will probably disagree with that, for the sake of this piece, let's just say as a nation we do want more students. Now that we're all on the same page, hypothetically of course, the question still remains: would making tertiary education free actually increase the number of people who study?

I asked students how they felt about having a loan. Interestingly the majority of people I spoke to weren't overly concerned with the debt. Most said it barely even crossed their minds, but what did bother them was the terms and conditions surrounding it.

Samantha Holland, who is studying business at AUT, said: "I don't really think about it because it's interest-free and you pay it off slowly when you get a full-time job anyway. "The only thing that would concern me is if I wanted to travel for ages then I'd have to start paying interest."

There's that travel thing again.

Another issue mentioned by students was their inability to get an allowance. Arts student Georgia Harris said not getting any student allowance was "more off-putting" than her loan. Another, Jordan Jones, completed his degree in psychology and sociology and wanted to do a post-grad; he was unable to "since post-grad students are not eligible for the student allowance".

And it's not just post-grad students that don't qualify for an allowance; it's everyone who has used up their 200-week allowance limit. This National Party policy was implemented in 2012 and especially affects medical, veterinary medicine and dentistry students, as their courses are all longer than the four-year cutoff.

After talking to young people, both students and non-students, I've come to the conclusion that loans are not necessarily a massive problem, but the conditions surrounding them are. This doesn't mean I'm against free tertiary education, because I'm not; I just think there are more pressing issues that need to be tackled before any grand scheme can be implemented.

I've done some island-hopping over this debate. I started on the left, then sailed over to the right, and now I've drifted to a completely new oasis altogether. One that I hope the rest of the nation will float towards - at least before they try flying to the moon.

Julie Cleaver is a journalism student at AUT.

- NZ Herald

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