Both students and Govt in dark on loans

By BRONWYN SELL

Student loan borrowers should be better warned about what they are in for, says a report by the Controller and Auditor-General.

The report, released yesterday, also found the Government was kept in the dark about how much the scheme was costing and how it was performing financially.

Little budgetary advice was available to prospective borrowers and they did not get information from Government agencies about the future impact of the debt.

It was also hard for students to calculate how long it would take to repay their loans.

"Although a student loan is a credit contract, student borrowers are not offered services comparable to those offered by banks," the report said.

The president of the Aotearoa Post-Compulsory Student Union, David Penney, said clear information was available for people involved in other risky pursuits, such as smoking, drinking and bungi jumping.

"With the student loans scheme, people are required to take a leap in the dark."

The Auditor-General's investigation is striking not for what it discovered, but what it was unable to find information about.

It said the student loan scheme was set up to encourage participation in tertiary education, but no one knew if it had achieved that aim.

Little research had been done into the effect of loans on the choice of study, on life choices such as marriage, family, children, jobs and investment, or on the ability to seek other loans.

Neither was systematic research done on the impact of student debt on the fees charged by such professionals as doctors, lawyers and dentists, or its effect on the property and labour markets.

It said Parliament lacked information on the overall strategic picture of loans, as well as the fiscal and social impact of loans on borrowers.

The Government did not know the cost of lending, the total cost of the scheme, or how it was performing financially.

The report said the Ministry of Education estimated student loan debt would reach about $20 billion by 2020 and repayments would not balance borrowings until 2012.

Student debt was potentially a major source of risk for the Government, and its benefits needed to be weighed against its costs and risk.

It was unclear which of the agencies involved with student loans had responsibility for managing the risks.

Tertiary Education Minister Steve Maharey said the Government was acting to address the concerns, and the education and select committee would conduct an inquiry this year.

He said the report supported his calls for proper research on how the scheme was affecting students' futures, along with the potential flow-on effects across the economy.