PAUL Thank you for coming on.
STEVEN JOYCE - Tertiary Education Minister
Not a problem.
PAUL Is National committed to interest-free student loans?
MR JOYCE Yes, we are. We believe we can actually do a heck of a lot better in terms of getting loan repayments and getting the cost of debt down. But we have accepted the political consensus on interest-free student loans.
PAUL Right, so changes are going to have to be made. We have to do something, given the parlous political situation. Uh, the parlous financial situation.
MR JOYCE Well, I think we've always said that we want to tighten things up, and we've had some good success so far. We've made some changes in the last two years that have resulted in an additional 20,000 places at universities and polytechs and the like without putting any more money in, so we've taken some money out of student loans and put it back into tuition. It's worked out pretty well. We think we can do some more.
PAUL Right, so what have you got to do?
MR JOYCE Well, there's two areas. Firstly, you've got the students overseas that you've mentioned. Those that have gone off on their OE and stayed, and they represent roughly 15% of all the people who owe money, but they have about 55% of the overdue debt. Now, previously in the old days, both the government of the day and the officials didn't believe it was worth chasing that money. They would just wait until they came home. We're not happy about that approach, and we've had some things in place where we've gone out and chased some money in Australia and actually getting about $4.50 back for every dollar of effort we put in, which is actually pretty good going, and we're now determined to get some more traction there.
PAUL Right, Australia is debt-collection agencies, isn't it?
MR JOYCE Debt-collection agencies and basically we're getting to the stage where we're actually going to enforce some contracts in Australia. The UK - we're about to have a go there as well. Interestingly, the UK reaction has been a little bit more "gosh, why haven't you just forgotten about me", but we're not going to forget about them because it's a lot of money, and it's money...
PAUL Well, the numbers are very big. Let's talk about the numbers, because the overseas former students, there are 85,000 and they owe $2 billion, but 35,000 are behind in their payments, and they are nevertheless being clipped, aren't they, at 6.6% interest, accumulating, but how are you going to do that in the UK?
MR JOYCE Well, there's two things. First of all we're going to get some debt collection in the UK and we're also looking at... We're doing two things as a govt at this point in time. One is that we are saying that we want the right to recall the whole loan, so it actually makes it worth doing the collection. Say, "Right, if you're just ignoring us, we'll recall the whole loan." Secondly, I think we should lower the interest...
PAUL Now, that's the bill... Is that the bill you've got before the House at the moment?
MR JOYCE That's right. That's right.
PAUL The Student Loan Scheme Bill.
MR JOYCE That's right.
PAUL The Revenue can suddenly say, "I'm sorry, we've put up with you long enough. Pay it back immediately."
MR JOYCE Yep. Pay the whole thing back.
PAUL And then what are you going to do if they don't?
MR JOYCE We'll take them through the courts, and we're pretty focused on this.
PAUL But what if they stay in the UK?
MR JOYCE Well, we're looking at this point in time at getting exchanges with other jurisdictions. Interestingly, most jurisdictions haven't shown a lot of interest in chasing student debt, but suddenly with the state of the world, they're a lot more interested than they used to be. But I think the other point as well is we have this thing called the three-year repayment holiday right now, which the previous government started, which seems to have been a pragmatic decision that they made that they weren't collecting it anyway, so let's pretend that we won't collect it. I'm concerned about that. I think it sends the wrong message that somebody can sit overseas for three years and not make any commitment at all towards repayment. Now, when you go on your OE, perhaps you go six months or a year without getting an income, but, actually, once you're over there for about a year, you've got to be living on something, and we're thinking that we might change the length of that repayment holiday. That's one of the things that we're looking very closely at.
PAUL How does the holiday work? At the moment, six months - you can go overseas for six months and not pay anything.
MR JOYCE 36 months - three years.
PAUL Three years.
MR JOYCE And it's actually... Everybody who goes overseas automatically gets it, and I'm thinking maybe we'll look at something like an application requiring them to leave a contact in New Zealand, for example, and actually limiting the period of time to a lot less than three years.
PAUL Is that going to be in the Budget?
MR JOYCE It may well be.
PAUL Mm-hmm, but then somebody working at a pub in London - you know, they might have been there a year and they might still be working at a pub in London and then travelling around Europe in the summer. They're not going to be able to afford to pay back. I mean, that's the reality, isn't it?
MR JOYCE Well, I think that there's an element of that, but you also have to look at some form of equity, because everybody who's remaining in the country is actually repaying their loans off in about four and a half years, on average. Those that are overseas are getting up to the sort of 10, 12, 13 years.
PAUL 13, 14 years.
MR JOYCE Yes, and those are big numbers, so I'm not quite sure why those who remain in New Zealand should, in effect - and other taxpayers - should, in effect, be subsidising that sort of lifestyle. I think you have a responsibility. You've taken out a student loan. You've got your education. You should be attempting and making the right attempts to pay it off. Now, if somebody's in hardship, they can apply for hardship and they don't have to pay it off. We don't make people pay it off if they don't have an income.
PAUL But don't we want our people overseas, you know, doing different kinds of things - doing their OE, getting skills, taking their time?
MR JOYCE And paying off their student loans, yes.
PAUL And paying off a bit of money.
MR JOYCE Paying off their student... It's a responsibility. New Zealand has a very generous student-support system. It's acknowledged as that. I'm actually pretty proud of it overall. I think we do a lot for our students. We have very high participation rates. But I think it's very important that people actually meet their obligations at the other end.
PAUL Is it fair to change the rules mid-stream, though?
MR JOYCE Oh, we've changed the rules at different times, and certainly if we were to change the repayment holiday, we'd have some sort of grandfathering provision, but the important thing is often the other problem we get is that people go overseas and they disappear over the three-year period. You never hear from them again and we've got no contact for them, and that's difficult to say...
PAUL Well, the name stays on file at the Revenue, doesn't it?
MR JOYCE Yeah, well, their name and that's about it. So contact details are very important. But, look, I just think that the general principle that most New Zealanders would agree we've got this reasonably generous system. There are benefits to the country. Meet your obligations.
PAUL So how much do you want to save?
MR JOYCE Well, I want to get it down... Currently we're writing off about 45c in the dollar for every student loan because of the interest-free policy. That's down from about 48c. We want to get it down to 43c-odd in this Budget and then I'd love to see it down below 40c. Two ways you can do that: one is get a much better repayment rate from international borrowers; second way is actually looking at some of the high-cost borrowers in New Zealand, and there are some. I'll give you one example which might be dear to your heart. We are currently loaning $30 million a year to people training to be pilots. $30 million a year. Most of them don't go on to get jobs as pilots, either in the commercial or general aviation sphere. The write-off for pilot training in terms of write-off of student loans is in excess of 60%. So we're looking pretty closely at whether we're doing that right.
PAUL What, are you saying possibly no more student loans for pilot training?
MR JOYCE Well, not necessarily no more student loans for pilot training, but we could be looking at things like saying, for example, "We won't fund your PPL or your Private Pilot's Licence," or, "We won't fund your solo-instructor hours." Those sort of things are options.
PAUL What about older people - people over 55 getting student loans for going to...?
MR JOYCE That is another one where there's a big write-off. I mean, once you get past 55 - if you take out a student loan at 55, 56 - then there's every likelihood that about 70% of that will be written off, because you're at the other end of your working career, so we are looking at some things around that. I think we always want to be able to provide some access, so for perhaps borrowing for fees, but borrowing for living costs and borrowing for the compulsory course costs is not necessarily where we want to be.
PAUL Right, so you'll be able to borrow for what costs?
MR JOYCE For the actual fees.
PAUL Over 55 for fees, OK.
MR JOYCE That's one of the things we're looking at.
PAUL But not living costs?
MR JOYCE But not living costs.
PAUL No. So how much...? Have you got a dollar figure on what you're trying to get?
MR JOYCE Well, we're looking for several hundred million dollars, and we think we can get that over a four or five year period, and what we'll do is we'll put some of it back into tertiary. But also, as you know, we've got our own budget constraints, and we're going to be looking to get a balanced budget at least as early as we have signalled previously. So tertiary and the student loan area is one of those areas where we're seeking to get some money back to the exchequer to help balance the books, and there's five or six areas where we think we can get reasonable sums of money that will help do that.
PAUL So list those again for me, the five or six.
MR JOYCE Oh, we've been looking at initiatives around Kiwisaver and Working for Families, student loans and across a range of areas.
PAUL Right. You see, some people will still be saying, "Why an interest-free scheme?" You know, Michael Cullen said, "Well, you know, we'll have an interest-free scheme. That'll encourage young New Zealanders, graduates, to stay in New Zealand to pay it off." Key called the policy back in '05 irresponsible, unaffordable - economically, the numbers didn't stack up. It's even more unaffordable now, isn't it?
MR JOYCE Well, there's two things. You have to ask what are you actually proposing to go back to do? Nobody, I think, is proposing to go back to putting interest on what people study, and people who are overseas have to pay interest, so you'd be talking about domestic students paying...
PAUL No, but it is unaffordable. It is unaffordable, surely.
MR JOYCE Well, no, not necessarily, because they're already paying off averaging four and a half years, and if we can get that down... But there's also a political consensus that's developed. We've fought two elections on that basis, and so the reality is that that is part of it.
PAUL Politically, you are stuck with interest-free, aren't you?
MR JOYCE At the end of the day with politics, you have to...
PAUL Yes, there are 580,000 reasons why you have to continue with interest-free.
MR JOYCE Well, no, that's not necessarily true, but I think, again, you can do a heck of a lot without actually going to that part of the debate. You can improve the collection, you can look at who has access, as we did last year. You know, we've stopped people wandering in from Australia or overseas and borrowing student loans the day they turn up.
MR JOYCE We've sorted that one out. We've put a lifetime limit on student loans. We've said, actually, you've actually got to show some academic progress while you're borrowing student loans. You've got to pass at least half your courses over two years. I mean, I think these are things the previous government should have done, they didn't do, and I think we can improve the return on student loans by taking these steps.
PAUL But again, look at the numbers. I don't see how the numbers work. $11 billion as of June last year.
MR JOYCE That's right.
PAUL $11 billion out there of borrowings, of which we get only half back. You've been referring to this number, of course. We get only half back because it's interest-free, so the amount...
MR JOYCE The interest part of it, but also the part of people just actually taking the responsibility and paying it.
PAUL Yes, it's the amount of money multiplied by time, isn't it?
MR JOYCE Yes.
PAUL So, essentially, you only get about 57c back in every dollar. You're borrowing $300 million...
MR JOYCE That's right. We're looking to lift that, as you say, to over 60% mark, and the reality is that we can do a whole lot of that without actually throwing the interest back on domestic students.
PAUL Yeah, but you look at the pie as a whole. $11 billion is out there. You only get 57c, perhaps you'll try and get 60c in the dollar back, which is a pretty poor return. You're borrowing $300 million a week for the country to stay afloat. You've got to rebuild Christchurch. How in God's name can you justify handing out free money that you won't get back for years?
MR JOYCE Well, I think the real opportunity that comes with student loan is actually access to tertiary education and to university study, and if you look at what's happened since the student loan scheme was introduced back in the mid-'90s, we've gone from a participation rate of about 150,000 people to 450,000 people. We've double the participation rate amongst young people, and all these people, particularly those who graduate from universities, get high incomes than they would otherwise, so I think there's some very good things that student loans as a whole have done for getting access for students to get a higher education, and we do want a more productive country, and that involves investing in education, and the government is right behind that. The question is getting the right amount of return. Part of the return is undoubtedly a highly skilled workforce. The other part of the return is getting some money back from the commitment...
PAUL The overseas students, of course, with the $2 billion worth of debt will say, "Why are you hampering our OE? Let us be free. Let us go around and experiment and have our experiences and so forth."
MR JOYCE I don't...
PAUL "Put the 6.6% interest on my IRD file and I'll pay it when I get back."
MR JOYCE Of course that's exactly what we are doing, but we are expected some repayment. I mean, the trouble is that some people have just disappeared and don't want to know. We had a doctor in Australia who was highly offended - very well-paid doctor - highly offended that we should deign to contact her about very large sums of money owed on her loan. We've had people in the UK say, "No, we should never have had to borrow this money in the first place. We don't want to pay it back and frankly New Zealand can go take a running jump." Now, I don't have sympathy for that approach and I'm determined that we chase some of that down.
PAUL The other thing, you know, is the moral business of is it right to lend free money to young people?
MR JOYCE Is it right to lend...?
PAUL Well, is it, you know...
MR JOYCE Well, you wouldn't just do it for the sheer enjoyment of people popping into the local TAB, but I think what you can it for...
PAUL Well, that's possibly what happens.
MR JOYCE ...is for education in their future. What you're doing is recognising the public benefit of a highly skilled workforce, and there are benefits, and of course they tend to pay a lot of tax in later life versus the private benefit of education. Some would say we haven't got the balance right in this country, but I think on the whole, we actually benefit from the whole situation.
PAUL Now, there's one other thing. I want to take a complete 180-degree turn.
MR JOYCE By all means.
PAUL Yes, the money that the government's essentially lent to MediaWorks. Treasury...
MR JOYCE I'm so surprised you brought that up, Paul!
PAUL (laughs) Treasury advised you that MediaWorks could survive without that accommodation.
MR JOYCE Well, first of all, it's not money lent. It's a deferred payment scheme. It has to be represented as a loan in the books. They did not get a single dollar from the government.
PAUL No, no, but essentially it's a loan, isn't it? I mean they could have... If they were having trouble, you know, paying what they had to for those frequencies, why could MediaWorks not have gone to a bank? Why does the taxpayer have to be essentially the bank?
MR JOYCE Well, the interesting situation there is we said, "We're only going to do this if it's done on a commercial basis." Effectively, they're going to pay 11�% interest for the deferred-payment system. We said that to all broadcasters. A number of them took it up. There were others that were looking at it and decided not to take it up, including people like Radio Rhema and the Radio Network.
PAUL Radio Network didn't take it up, did they?
MR JOYCE That's right. But, look, the scheme was very simple, and the government did a lot of things in 2009 to defer payments owed to the government for various things, to ensure that people kept their jobs, including, for example, in company tax - things like provisional tax payments. We softened the requirements there to ensure that people could stay in jobs. Now, the flip of this - if we hadn't done it, if we hadn't actually taken this scheme and half the radio broadcasting industry had gone broke, and then it had come out that the government had been offered and opportunity to save some jobs by providing a five-year deferred payment with full interest, and we hadn't done it, they'd say, "You heartless, heartless government."
PAUL Well, Minister, that's the market, isn't it? Why not let MediaWorks sort it out? Why not let MediaWorks try to...?
MR JOYCE Why not let all the broadcasters...? The unusual part about this was...
PAUL Well, only MediaWorks took it up. Could I just say, though...?
MR JOYCE No, no, hang on one second. Right at the middle of the global financial crisis, right. Right at the middle of it, we were requiring the radio industry, just by sheer luck of confluence of circumstances, to pay a massive amount, by their standards in terms of their turnover - which they had agreed to -- $90 million-odd for frequencies for the next 20 years. And somebody would say it would be a pretty heartless and ideological government that couldn't actually have offered a deferred-payment scheme with commercial rates of interest over the next five years to get them over that hump and keep people in jobs, Paul.
PAUL Can't you see how bad it looks that you essentially bailed out the company you founded? It looks to people like crony capitalism.
MR JOYCE Well, that's just rubbish. I hadn't been anything to do with them for 10 years. It's a bit like saying that Annette King couldn't be the Minister of Health because she'd been a dentist in a past life or Trevor Mallard couldn't be the Minister of Education because he'd been a teacher in a past life. I mean, for goodness sake, it's 10 years since I was involved in that company.
PAUL Minister, I thank you very much indeed for your time.