Student debt 'delays' adulthood

FILE

More than $190 million is owed to the student loans scheme in Rotorua - a pile of debt which has huge consequences, an expert says.

Rotorua's student loan debt grew by more than $50 million in the past five years to $193,200,000 as of June 30, according to Inland Revenue figures released under the Official Information Act.

A sociology professor says the debt delays adulthood, increases social inequality, and makes "financial risks" of previous norms, such as having children.

Rotorua Salvation Army community ministries manager and budget adviser Shelly Fischer said student loan debt was a burden for many people.

"I'm surprised at how high the debt is for Rotorua - that's a lot of money," she said.
"The incomes of a lot of the clients we have are to low to have to pay back any student loan debt they might have so it remains."

Student loan debtors receiving any more than a gross income of $19,083 have repayments deducted. Nationwide, student loan debt grew year-on-year for the past five years to $11,688,600,000 as of June 30.

Tertiary Education Minister Stephen Joyce said New Zealand had "one of the most generous student support systems in the world", and the long-term benefits of tertiary study far outweighed the short-term cost of having a student loan.

However, University of Auckland sociology professor Alan France said student debt was causing several knock-on financial and social effects.

"We used to talk about adulthood coming to fruition between 18 and 21 but now it's more between 25 and 35," he said.

"There's lots of long term evidence that shows you will earn more money if you go to university, than if you don't, but these days that pay off takes five to 10 years.

"Most people now go in to low-skilled, low-paid jobs which are insecure when they leave university, so they wind up fighting large student debts on low incomes from jobs which don't have a great deal of long-term future prospects."

Graduates from low socio-economic backgrounds had it particularly tough, he said.

"Parents from wealthy backgrounds are able to help kids in all sorts of ways; letting them live at home for free, helping them with a mortgage, different types of subsidised living, buying them cars and so on.

"Alongside that, there's a strong social network in the middle classes of New Zealand so they'll likely know people who can get their kids internships, jobs and other opportunities.

"Kids with parents who can't support them financially come out with bigger debt, work longer hours and borrow money from other sources where they can..."

Regardless of background, buying houses and having families were increasingly difficult for young people, he said.

Mr Joyce said there was no statistical evidence to show having a student loan had any impact on childbearing trends.

"The median earnings of young people who complete a bachelor's degree are 46 per cent above the national median earnings five years after finishing study," he said.

"Meanwhile on average, students who stay in New Zealand repay their loan within six years."