Last Straw

A reader over at fro­gb­log explains the his­tory behind and the jus­ti­fic­a­tions given for char­ging a rate of interest on stu­dent loans any­thing more than infla­tion. Not sur­pris­ingly the free-market fundies of Labour and ACT had a major part to play:

Chris­ti­aan,

The loan scheme was set up under Phil Goff as min­is­ter of edu­ca­tion dur­ing the Lange/Roger Douglas Labour regime. The claim at the time was that any­thing less than mar­ket interest rates would dis­rupt the free mar­ket in credit, eg caus­ing stu­dents to ‘max out their loans in order to pay down their mort­gages’. ACT has made sim­ilar claims since.

This ‘logic’ (and I use the word loosely) has not been used any­where else in the West­ern world: as a res­ult we ended up with a stu­dent loan scheme that even Amer­ic­ans con­sider dra­conian (USA has a much kinder fed­eral stu­dent loan scheme than ours). Quite how the sup­port­ers of market-like interest rates failed to notice that over­seas loans scheme don’t hit the prob­lems that claimed were ‘inev­it­able’ I won’t go into.

The stu­dent loan scheme has been tweaked since, but the basic his­tory is that is star­ted dra­conion so minor changes haven’t yet made a really big difference.

A fur­ther com­plic­a­tion is that stu­dent debt is turn­ing into a major part of the govt’s debt, so lower­ing interest is now a major budget-shock to the govt. This is the ‘inter­tia’ prob­lem — the longer the loan scheme goes on, the more is owed by more people, the harder it is to change.

Keith NG of Pub­lic Address and Sali­ent Magazine gets the scoop on point­ing out the dif­fer­ence between Labour’s rhet­oric and actu­al­ity with regard to stu­dent allow­ances. Fro­gb­log gets in on the action, and Just Left sets up for the apo­lo­gist line.

Mean­while, the 27 true authors of Dog­Bit­ing­Men had a Mur­iel Phase and com­piled a list of things they’d like politi­cians to ban people from doing in order to get their votes.