Labour’s universal allowance ignores whole generation of debt

By Angela Beswick and Sarah Urlich

News that Labour will introduce a universal student allowance has been welcomed by students nationwide, but greeted with scepticism by others.

The universal student allowance will make more than 50,000 students aged between 18 and 23 better off by phasing out the parental income threshold. By the year 2012 the threshold will be abolished altogether, giving students up to an additional $150 a week.

Co-president of the University Students’ Association Paul Falloon said the move was better for New Zealand in the long run.

“This will increase the chance of keeping students in New Zealand when they graduate,” he said.

Falloon said student debt, now at more than $10 billion, had created a skill shortage. Many students were going overseas in search of higher wages.

Garrett Denton, a technical support specialist, said that in the 10 years he had been studying, he had accrued more than $85,000 worth of debt. Denton did not qualify for the student allowance. His student loan covered his course fees only. He took on the $150 living costs each week as well as the $1000 course-related costs each year, all of which must be paid back on top of the student loan.

“I try not to think about how long it will take to pay back. All I know is that money goes out every fortnight, and has been for about four years,” he said.

Denton questioned why the universal allowance was being introduced so close to the election, when students had been lobbying for years to have it introduced.

“I don’t think it’s fair that students like myself have to be stuck with a loan like we do, interest accruing by the day. My concern is where this money is going to be coming from.”

Falloon agreed there would be very serious questions raised about students who had already graduated.

“Students accrue a massive amount of debt and families have to work hard to support them,” he said.

The Green Party’s education spokesperson Meteria Turei says while the Greens are very pleased with the announcement, it is obviously a “vote catcher”.

“There will still be students who will complete studies without ever having had access to  a student allowance,” she said.

Falloon described the student loan scheme as a “failed experiment”.

However Turei said today’s students may have to accept being part of this situation.

“There’s been a generation of students who have had to pay. Those who have been experimented on will have to wear it,” she said, adding that some of those who have student loans will have children going into tertiary education, so will benefit from it in a different wawy.

At Labour’s campaign launch, Helen Clark said the new policy meant students would be borrowing less, and therefore were able to move on faster from debt incurred during tertiary education.

Most of the students who will benefit receive no allowance under the current scheme. These students would need to borrow, receive help from their parents or work part-time to make ends meet.

Falloon said on top of the basic student loan there was currently large borrowing for private debt. A universal student allowance would help students whose parents’ incomes were only slightly over the current allowance threshold, he added.

Turei agreed: “Once it’s fully rolled out it will be enormously beneficial.”

Labour said the policy was being phased in to ensure its affordability.

New Zealand First leader Winston Peters told the New Zealand Herald Labour had underestimated the cost of its allowance policy. He said Labour had adopted his party’s policy, but had got its figures wrong.

However, Helen Clark said the $210 million a year figure Labour had provided also took into account a reduction in the amount borrowed for student loans as a result of the allowance.

From January 1, 2009, the parental income threshold will increase to just over $50,000.

In 2010 the threshold will increase again to $70,000 before being increased a final time in 2011 to $100,000. By 2012 the parental income threshold will be abolished altogether.

By Angela Beswick and Sarah Urlich