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Q+A: Transcript of Steven Joyce interview

Published: 2:21PM Sunday May 06, 2012 Source: Q+A

PAUL 
More than half a million people owe $11 billion in student debt, and now the Government is forcing them to repay it faster, plus, study longer than four years, there will be no government allowance.  There will be other changes as part of the Budget on May 24.  Labours already calling it a black Budget for the half a million students, but Business New Zealand says the student loan scheme free loan scheme is dopey and it is a hopeless expense and they want to end this interest-free-loans business.  Is that likely?  Tertiary Education Minister Steven Joyce is with us.  Welcome.

STEVEN JOYCE Tertiary Education Minister
Gidday, Paul.  How are you?

PAUL 
Can we talk about the interest-free-loan scheme?  Can we actually afford it?  Half a million New Zealanders now owe $11 billion.  Can we afford this?

STEVEN  
Well, in the sense that we can afford anything that we do, of course it is affordable.  Its just a decision that you make, and, actually, the public, I think, have said that they want tertiary students to pay a contribution towards their education.  I think everybodys agreed on that.  But theyve also said they dont want to be actually them having their whole lives attached to a loan which means they cant get on and actually get families together, buy houses and those sorts of things.  So I think there is a balance there, and thats the balance were trying to strike.

PAUL 
Well, but in the end, can we afford it?  I mean, do you think its good policy?

STEVEN  
I think Look, I actually think its fine because the repayment rate is actually the rate at which people pay off their loans is actually about, sort of, five years if they stay in New Zealand.  Its a lot longer if they go overseas.  This will shorten it back to about four and half years.  And I actually think thats about right.  If you put interest back on the student loans, you would extend the repayment time out for many years longer, and I think theres a trade-off there, and we think we can make this repayment rate change, which increases
 
PAUL 
Well, when Labour introduced this, you all thought it was, in fact, your leader called it an 05 dopey policy.  I think he called it No, he didnt call it dopey; he called it reckless and irresponsible.  Do you still think that?

STEVEN  
I think he thinks that

PAUL 
11 billion bucks worth of debt.

STEVEN  
Well, no, thats been current for Thats irrespective.  If you actually put the interest back on, the debt would be bigger, because, actually, it would be accumulating at a faster rate, so the 11 billion thats the whole student-loan scheme since it began has created sizeable debt.  But, look, its the way in which we can get more students through university.  The other side of it is we actually have the most students that weve ever had going through.  Weve got a very highly trained and highly skilled workforce as a result of this scheme.  But its about getting the balance, and we think if we can get it to pay off a little bit faster, we can reinvest that money in tertiary education, which we need to do to make sure that weve got a better system for the next group coming through.
 
PAUL 
All right, but regarding the current system, if it were politically feasible, would you scrap it?  Would you get out of it somehow?

STEVEN  
No, I dont think that we would for exactly the reason I

PAUL 
Youre only getting 41c in the dollar back from this

STEVEN  
Actually, were not.  When we inherited it, we were getting 50c in the dollar back, and were going to get it down to about 41c, 40c with these changes.  But the trade-off is you dont want all the skilled people spending the rest of their lives paying off loans.  There is a balancing act there, and if you put interest back on the loans, itd be five or 10 years longer before they actually end up paying them off.  This process that were doing now asking them to pay a bit more will shorten the repayment period by about four to five months on average and give us significant sums of money to reinvest in the system.

PAUL 
Yeah, but, see, the country The country is borrowing and paying big interest and doling the money out with no interest.  Phil OReilly of Business New Zealand says, National and Labour should both wake up and realise we cannot afford it in the state were in. Whats more, he believes its unfocused, random spending.

STEVEN  
No, well, I mean, in the same, Phil would turn around and say, Yes, but we need to have a highly skilled workforce, and we need to invest in that highly skilled workforce, and so it is a balancing act.  We do spend a lot of money on student support in this country.  Theres no doubt about that, and we are going to shift that at the margins back into investment in the system itself.  But, actually, our tertiary system on the whole performs pretty well.  Its performing better.  We need to invest more in strengthening our universities.  I think that is very important to make sure that they continue to compete in the world.  Theres no point in having an education a university education if its not seen as a really quality university education.  So we are going to put another $60 million or $70 million a year back into the wider tertiary system.
 
PAUL 
All right, with the extra youre getting.

STEVEN  
Thats right.

PAUL 
And youre going to get that extra from the students who stay here.  Theyre going to have to pay 12% of all earnings towards their student loans instead of 10%.  Now, thats tough, isnt it?

STEVEN  
Well, for somebody on about 25,000, at the bottom end, thats about two bucks a week.   For somebody at 70,000, thats about 20 bucks a week more.
 
PAUL 
Yeah, so a couple a couple earning about 70 between them, its about, what, 30, 40?

STEVEN  
No, it depends on their level of loan, but wed still be it would still be 70 if its 70 grand, itll be 20 bucks a week.

PAUL 
What Im saying to you why wouldnt they go to Australia now?

STEVEN  
Well, because

PAUL 
Youre not doing this to the overseas borrowers.

STEVEN  
Well, actually, we are.  Theres two changes there.  Firstly, we are chasing the much harder
 
PAUL 
Yeah, youre chasing them.  Youre chasing them.

STEVEN  
Yeah, well, thats right, and catching them.  And, actually

PAUL 
Yeah, and the ones that stay in New Zealand, that make the commitment in New Zealand, theyre captive you can hit them easily.

STEVEN  
Yeah, but, actually, the ones that go overseas pay interest on their loans, Paul.  The moment they leave, theyre paying interest on their loans, so thats actually yeah, its actually a disincentive for people to go overseas, because if you go overseas, youre paying interest on your loans and it accumulates while youre overseas.  If you stay in New Zealand, you can pay it off under the system.  Yes, it will cost a little bit more, but theyll pay it off on average four to five months faster and well get the money back for loans, and meanwhile were chasing those overseas, which the previous government dismissed as a too-hard approach.  They said, Oh, if they go overseas, well catch them when they come back. 
 
PAUL 
What improvement have you made to catch them overseas?

STEVEN  
Oh, weve

PAUL 
What improvement?

STEVEN  
Well, first of all, weve put the debt

PAUL 
Very quickly.  Quickly.

STEVEN  
Debt collectors after them in the UK and Australia, weve made it so you can enforce court judgements to collect the whole loan, weve got some going through the courts right now, and were spending, frankly, just advertising and chasing them, and were getting a return of about $15 for every dollar were investing and hauling this money back from Australia and the UK.  Its early days, but theres a lot more to do, but I think we can make a real change there.
 
PAUL 
Righto.  Another thing youre doing is youve flagged the dropping of the bonus repayment scheme.  This is something you introduced

STEVEN  
Thats right.

PAUL 
Whereby you gave a 10% bonus on voluntary lump-sum repayments, for example, if I paid you back $500 of my loan, youd put in an extra 50.

STEVEN  
Thats correct.
 
PAUL 
So actually 550 would go on

STEVEN  
It was costing us $11 million or $12 million a year, and it wasnt achieving the change in repayments rates that we were looking for, particularly from overseas borrowers, so what weve decided instead is to toughen up on overseas borrowers.

PAUL 
Right, is it definitely going?  Because youve flagged that it might go.  Has it?

STEVEN  
Yeah, I think its highly likely at this point.

PAUL 
Now, another thing youve doing is youre doing four years maximum payment of student allowances.  Now, thats going to discourage postgraduate study, isnt it?

STEVEN  
No, its
 
PAUL 
Thats the big thing there.  Okay, you can still get a student loan.

STEVEN  
Yes.

PAUL 
I know that, but youre not paying allowances over four years.

STEVEN  
Well, hang on.  You were criticising me before, saying that the student-loan system is a waste.  Now Im asking people to use it rather than getting this free money from the government, and youre saying that thats a criticism of it.  Now, the important thing to point out there is this that currently its 200 weeks.  Theres no change to that.  It will still be 200 weeks.  What were saying, though, is that once youve used your 200 weeks, thats the end of it.  Currently, you can get exemptions for long programmes, as they call them, or for masters or PhDs.  But when somebodys getting to the point when theyre doing a masters or a PhD or a long programmes where theyve perhaps done one degree and theyre going to do another degree, they are going to have a good income when they leave, and therefore they should be able to pay off a student loan, and therefore the student allowances should be better placed for people that are actually at the starting-out position.
 
PAUL 
I know, but I suppose one of the criticisms coming in is its going to make it very tough for medical, veterinary, legal, engineering students.

STEVEN  
No, it doesnt.  If you take the medical degree, if you just do a medical degree, you would still be able to get through your first 200 weeks, which is your first five years of a medical degree.  In the sixth year, they get internship money anyway, so it actually wont change for somebody whos on a medical degree, unless theyve done another degree first, in which case, yes, there is a limit to how much money you get from the Crown free.  Remember, we are spending now when we came into office, we were spending $385 million was the last year that Labour left, then they through the changes to the student-allowance scheme, increased the parental income threshold and a range of other things.  Its now got to $620 million a year.  We actually have to curb that a bit at the top end.

PAUL 
Righto, got you, but then, you know, if we really want the knowledge economy, we really its the postgrads who make this country an intelligent and innovative country.

STEVEN  
We have

PAUL 
And youre almost theres a hint of your disincentivising postgrad work.

STEVEN  
No, not at all, and, actually, weve got the highest number of postgrads and PhDs that weve ever had in this country right now, and we will continue to do so.  But theres no point being worried about their access to a system, on the one hand, but not being worried about the quality of that system on the other.  And its important that we continue to invest in research, we continue to invest in the important areas, like science and engineering, and these are things youll see more of in the Budget.
 
PAUL 
Just a quick word what do you say to parents who see their kids going on to postgrad studies massing more and more debt?

STEVEN  
I think

PAUL 
What do you say to the parents?

STEVEN  
Well, I say that, actually, it is an investment in their future.  The reality of it is this: in New Zealand, the taxpayer invests a massive amount towards what is largely a private benefit of high-level tertiary study.  We subsidise the tuition by about 70%.  We also then advance interest-free student loans.  We write off about 45c in the dollar of that currently, trying to get that down to 40.  And we also, for the early years of study, 200 weeks, which equates to about five years, we give those that have low parental incomes free allowances.  So, actually, its the easily the most expensive student-support system in the world, and it is appropriate that people do make a contribution.  And its about where that balance is and again making sure that we dont underinvest in the tertiary system overall underinvest in our universities.  That would be a mistake and would be a false economy in terms of trying to grow this knowledge economy you talk about.
 
PAUL 
There I will leave it, and I thank you very much for coming in, Steven Joyce.

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