The madness of student loans – generation rent = generation debt

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OWS-debt

Gen Xers and Gen Y have been damaged by user pays neoliberalism. It has robbed us of the universal benefits of a liberal democracy which has created a legacy of debt we can’t recover from while the cultural values of consumerism has led to the worship of the wealthy elites who have benefitted most from this corporate feudalism.

That Max Key’s narcissistic Hawaiian holiday footage should become such a celebrated media focus suggests our culture has degraded to the point of having the maturity of a can of Coke.

Because the idealogical compass has been so badly damaged, young people in this country are more likely to cheer John Key when he is on the Rock or The Edge or ZM, and the poor who have actually had harder times under National will keep voting for him because Mike Hosking, Paul Henry and Patrick Gower play to their lesser angels and offer zero critical evaluation.

We have become a nation of blind sheep led by hungry wolves. There’s a reason critical voices like John Campbell, Mihingarangi Forbes and Dita De Boni have been removed from the mainstream and there’s a reason why investigative Journalists like Nicky Hager, Jon Stephenson and Glenn Greenwald have been denigrated.

Young people are totally at the mercy of the older generations who are voting for their self interest and their constantly growing property portfolios. This total disconnect with a politically  active youth (anyone between 18-29) has been created by making all ‘youth’ media politics free zones and the dismantling of Student Unions. Youth live in a  bubble world of disconnection without the intellectual or ideological tools to understand why and how they are getting screwed over when to comes to social policy.

Bernard Hickey makes the point clear…

There were 864,100 New Zealanders aged over 60 in September last year and 87% of those voted in the election. There were 743,200 18-29 year olds who could have voted in the election and who will have to pay the taxes to pay for the NZ$100 billion in pensions by 2060, yet only 49% actually voted. If the young had voted at the same rates as the old then there would have been an extra 282,000 voters.

…the boomers will always vote, they have a clear vested interest in stopping capital gains, the younger generations are totally disconnected from the process.

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This constant user pays onslaught against young people is creating real economic segregation...

What are your odds of being a millionaire, do you think? One in 10? One in 50? One in 100?

If you’re over 62, your odds of having at least $1 million in net wealth (your total assets minus your total debt) are relatively achievable – about 1 in 7. But if you are under 40, your odds are low: 1 in 55.

In the last 25 years, the odds that an old person is a millionaire have improved slightly. But for young people, they have gotten much worse.

…in NZ student loans are so huge that they hang over two entire generations now like a tombstone that has created a downstream impact that has locked them out of home ownership, forced them to save for their own retirement and trapped them from social advancement beyond a Facebook like or twitter retweet.

Look at how out of control student debt has become

“With student debt to reach $15,000,000,000 in 2016 and the typical graduate entering their working life with a debt of $50,000, we have a situation which is simply untenable.” CTU Secretary Sam Huggard said.

“Getting a tertiary qualification is increasingly unaffordable with student support failing to keep up with costs including rapidly rising fees. The report shows that increasingly the decision to study and choice of course is based on cost, not on talent or interest.”

“The report also shows an increasing divide between those who have parents who can help them through tertiary study and those from poorer back grounds who mount up increasing debt or are even forced to drop out.” Huggard said.

This is shown by falling participation in tertiary education. Ministry of Education data shows the participation rate taking age into account has steadily fallen by a sixth from 12.3% of the population in 2008 to 10.2% in 2014 since this Government took office. It is particularly affecting people aged 20 or over, many of whom are looking for a second chance or needing to retrain because of changes in their jobs and industries. “Both from the point of view of workers as learners, and in terms of New Zealand having the range of skills needed for to drive our industries and sectors, this is a worrying trend,” Sam Huggard said.

…our lack of a unified voice, the right wing mainstream media echo chamber and the lack of space for 18-29s to even debate the issues are compounded by a Political class focused on winning over the middle rather than bringing on board the disconnected voters.

18-29 year olds need to understand they have the political muscle to beat the self interested older generations, and when you consider the legacy of debt and damaged environment  younger generations are inheriting from older voters that understanding has to happen by 2017.

24 COMMENTS

  1. “…the boomers will always vote, they have a clear vested interest in stopping capital gains, the younger generations are totally disconnected from the process”

    Martyn, from the repeated references to the mass of people as sheep, or sleepy hobbits, you clearly have problems with the respect for people that underpins democracy. You believe the 80% of voters who party-voted National or Labour to be devoid of intelligence or integrity or both, and we take this into account when we read your often perceptive and passionate writing.

    But sloppy thinking undermines the above quote on three counts:

    1 The oldest boomers, born after WW2, are not yet 70, the youngest not yet 60, and even the ones you quote, the 60+, include one in eight that DID NOT VOTE.

    2 The more than half the 18-29 year-olds DID vote.

    3 But most importantly, it is a vile slander to assert that ALL the people who vote do so simply for their pecuniary advantage. Many of us actually consider the well-being of the disadvantaged, or of the country as a whole, or even of the planet when deciding who to vote for.

    For example my party vote went to a party that sensibly espoused a capital gains tax, in spite of my being a house-owner, and previously a landlord. Had anyone proposed a CGT on ALL property I’d have been seriously tempted.

    The advantage to me, I acknowledge having one, is that my enjoyment at living in a decent society is much more powerful than monetary gain. I doubt I am the only one!

  2. I am getting confused with the arguments.

    The student loans are an extra tax. Albeit a tax, that can be paid off. There is no debtors prison. You only pay them if you earn over a threshold like marginal tax rates.

    If these extra marginal tax rates on those with student are delaying lives, children and generally growing up.

    Are people then suggesting lower general tax rates is something that is beneficial to society and we should vote for right-wing governments in perpetuity?

    If you have no problems with top 45% tax rate (33% top plus 12%), then you should have no problems with student loans repayments.

    I had $50,000 in student loans from the 1990’s, around $75000 in todays money. I have no problems paying back to society. All these selfish people wanting other to pay all the cost of teritary education.
    It is middle-class welfare at is worst. See Brazil and Chile, the children of the wealthy have their university education fully paid for but on the backs of poor whose children don’t attend Uni.

    Selfish, Self-serving, Sad-reflection on those ….take, gimme more…. takers. They should be wanting to give back to society and happily paying into the education system for others to have the opportunity.

    • My children when at University had loans which they have subsequently repaid. The loan system enables students to complete their education without being a drag on parents or putting themselves in the hands of the banks. The concept was introduced to enable students to obtain a qualification which would provide them with the opportunity to gain employment and accordingly repay the loan.

      If interest had still been charged young people would have been taught the value of money. No interest loans do not teach students to repay debt.

    • What you say would be fine if there where a job for life after wards. No one stays in one job more than 10 years. Effectively making it a $50,000 cost every time you change a job.

      Besides what you say about student debt being completely wrong. Ruth Richardson advertised student debt as a way of keeping up with research and development. Because business are to preoccupied investing in share buy backs or the huge investments in speculative bubbles rather than investing in new means of production.

      So the burden of the banks investing in new start ups which we know 4 out of 5 fail. That business cycle gets dumped onto tax payers and our most vulnerable student.

      Typical it is of government and corporate cronies to decry they need new suckers to borrow more than the previous owners of debt borrowed to live a better life. The share arrogance of baby boomers to say it is the generations after them that brought about gross inequality.

      • Think it is truism that the definition of too much tax for most people is “I pay too much but the person who earns more than me is not taxed enough”

        People don’t want to pay tax/student loan repayments, they want others to pay it for them.

        Student loans repayments works like a tax. You are guaranteed not to pay it if you don’t earn very much. I have to pay interest on my student loans, which I thought was unfair. I earned income due to the study and I should be able to tax deduct the expense.

        As the current systems stands, forget about the balance of the loan and think about as an extra tax. I remember an actress saying she thought she didn’t pay enough tax, for those with similar sentiments; rejoice that you pay into collective purse that pays for education, health and welfare.
        I dare to say it and donate extra if you so inclined.

    • Selfish, Self-serving, Sad-reflection on those ….take, gimme more…. takers. They should be wanting to give back to society and happily paying into the education system for others to have the opportunity.

      Like Steven Joyce. And Roger Douglas. And Ruth Richardson. And Jenny Shipley. Those free-loading parasites who all received a tertiary education at the tay-payer’s expense. (Perhaps I’m labouring under the delusion that taxes are in fact for things like health, education, welfare and the general upkeep of a nation’s infrastructure.) Shame on them.

      Why don’t you go to a primary school and start handing out Chupa-Chups. Give them to half the kids for free, and tell the rest they have to hand over 50 cents for the privilege. Then lecture them on user pays and the free market. Let me know how many kids start crying, and how many teachers call you a heartless shit.

    • David, there would be no need for student debt if we returned to the pre-1992 system of free tertiary education. All you’re doing is attempting to justify the current National/ACT semi-user-pays regime – which has left students facing over $14 billion collective indebtedness.

      This forces many to go overseas. That does not help our country one iota. (We end up being a training-centre for other nations.)

      Those that remain face big debt and have to post-pone having families; buying a home; or even setting up a business.

      These are all hurdles that the likes of John Key, Steven Joyce, et al, never had to face: their university education was free (except for minimal charges). They also most likely received a student allowance.

      And of course, jobs were easier to come by, before Rogernomics began.

      You say there are no “debtors prisons”? You are not wholly correct. Loan defaulters now face arrest if they return to New Zealand. If they refuse to pay their debt, prison could be a likely option. If not – that may be National’s next step.

      The only reason students are facing massive debts is because this country has had seven tax cuts since 1986. That simply shifted responsibility from the State/society to pay for peoples’ education – to individuals.

      Previous generations prior to 1992 had no such burdens, and even with restrictions to mortgage lending during the Muldoon Era (shades of Bill English’s LVR restrictions!), it was possible to buy a home and raise a family. (I had no student debt and bought my first home at age 20.)

      You refer to “selfishness”?

      Well, the only selfishness I can see is that of people like you who think it’s fair that generations post-1992 are saddled with billions in debt which their parents and grandparents never faced pre-1992.

      Older generations had the benefit of free tertiary education and instead of passing it on to their children, allowed successive governments to instigate Student Fees/Loans, and cut taxes.

      Only a neo-liberal with a disengaged sense of moral fairness could possibly view that as “fair”.

      • Generals fighting the Last War

        We should be reassessing how we educate society. Now 30% of school leavers attend university and only half of those will graduate.
        Look, people may benefit from tertiary education but university are not the monopolies of information anymore.
        The internet…massive online courses are available. We should be looking at skills and not just credential accumulation to improve job prospects.

        People are looking back with rose tinted glasses. Very few people in the 60’s and 70’s went to UNI. We could afford it if we only accept the top 5% and make it free for the few but not 30% of the population.
        Not realistic.

        Free is not free, someone pays for it.

        If it was up to me. I would make education free for online courses. And those with the personal attributes to complete it, only <5% have the stickability. Those that make it then can have their education for "free", we can afford that but not the lala utopian land..free for all.

        I want my generation not to be as selfish as the baby boomers, we should pay for our generation's cost and not pass it to the next.
        It seems to me.. the argument is.. some of the previous generation didn't pay for it, so I shouldn't either. And not let's make the system as sustainable as possible so further generations can benefit.

        Leave it better than you found it.

      • “Older generations had the benefit of free tertiary education”

        SOME people in the older generations… and they still had to pay for text books, transport, accommodation because uni wasn’t exactly ‘next door’.

        SOME people went to Polytech.

        A helluva lot of people in those so-priviledged generations left school at 14 or 15 with or without School C and worked a forty hour week. Perhaps they had an apprenticeship.

        I’m not sure why some people, at the fringes of being ‘Boomers’, are so aggro. The percentage of ‘Boomers’ who went into politics is minuscule. The people who gave them their ‘obscene advantage’ were their elders – who thought it was a darned good idea.

        Most of those pesky ‘Boomers’ had to wait until 21 to vote – and political education was seriously scanty, so how did they manage to finagle such Advantages?

        And how does banging on about this Outrage! and Injustice! actually help to remediate the present situation?

        You’re preaching to the choir and the choir is getting a little tired of the guilt trips that have neither destination nor action.
        Unless you have some evidence that the older voters respond well to being shamed for circumstances they had little or no power to change?

  3. Be happy to pay for your education, so other following you can get the same benefit.

    All those people wanting to avoid student loan repayments/taxes, you make me sick. Student loan repayments are like taxes an extra 12% for those earning over $18000.
    So all those who think the tax rates are too low… how can you be against student loan repayments. It’s immoral. I had $50000 in student loans and I was happy to repay society.

    • So you are delusional to think paying extra for a society that has Largley remained the same if not far more inefficient. New Zealand has for 40 years been unable to bring together idole hands and resources to badly needed work. Work like the completion of Auckland airport loop highway which was meant to be the corner stone of Ruth Richardsons and treasuries budget goal. Government and its cronies have swallowed the kool aid so hard. No one believes you Davie

    • @ David . Lovely David . Beautiful David. Brilliant David . Exceptional David . David The Genius . David , lover of all things . Particularly the Logical Fallacy. Of how to undermine by using cheap truths to hide twisted lies to enable an on-going swindle.

      @ Wonderful David. Sprung bro . Big hugs and kisses xxxxx
      Thou Shalt Not Commit Logical Fallacies
      https://yourlogicalfallacyis.com/

  4. And all those baby boomers paid off their student loans…oh that’s right they didn’t have any….and now they have pulled the ladder up for future generations. That must make them feel real good – making their children and grandchildren suffer. Love your work!

  5. When something as stupid as student ‘ loans’ is foisted onto those wishing to learn , thus provide a qualified service to the greater population in time to come?
    You know that greed is afoot. What’s this I hear about Government loan funds allocations being a financial product from which monies can be harvested? Is not Westpac the ‘ Governments ‘ bank ? Is not a significant amount of budget debt set aside to provide student loans and that money is insurable, re insurable and fiddle-able by hot sweaty little yankee doodle psycho jonky-stein-esque characters simply using students and their increasingly dire need for assistance to justify the money fetishists wallowing in the public trough? Or am I mistaken?

    The best way to approach our brilliant young minds is to shower them in riches. Make life affordable and allow them to have fun too. Not get all twitchy every time one of them dares to get pissed , stoned then shag each other after jumping around all night to a loud and thrashy band comprised of other drunk, stoned, noisy , brilliant, little shits in rude and enviable good health.

    Because you do know what the outcome of that would be right? Happiness and contentment. Not this shit. Anger, fear and a determination to get the fuck out of Nu Zillind as soon as mum and/ or dad can cough up the airfare.

    The grinding machine behind student loans, like other equally stupid ideas of user-pays are the banks making money for the select few. It’s that simple.

    Students ? You’re being swindled.

  6. Because loans are interest free they have also had appeal to those who would not normally pay their own study fees as these students can invest the money they had set aside for university and effectively obtain interest income on the interest free money they receive through the student loan scheme.

    The system design helps those without money, but also provides an income stream for those that could pay their own fees. Interest rates are currently low but during the mid part of the past decade rates were up to at least 8% on call and more if fixed. 8% on a $30,000 loan for one year is $2,400 per annum.

    • Grant, if we had free university education, we wouldn’t need student loans and the bureacracy that goes with it.

      We wouldn’t have kids going overseas in search of better paying jobs to pay of that debt (and losing their skills in the process).

      We wouldn’t have kids unable to buy a home or have a family, because they are burdened with debt.

      Contrary to your views, the “system design” does not “help those without money”. That assertion is not supported by reality, and sounds more like wishful thinking.

      Prior to 1992, kids did not have to borrow large sums or worry about debt or interest rates or any other such garbage.

      Instead, they focused on their educaqtion; graduated; got jobs; and paid their taxes which financed the next generation to get their education. It was a logical, simple, elegant way to “pay it forward”.

      Now we have a system that “encourages” kids to bugger off overseas and not return. Those that remain, put of having families and buying a home until in their 30s, 40s, or older.

      There is nothing remotely rational about this system. It was founded in dogma; maintained by self-interest; and will eventually become unsustainable.

      As with most economic problems that New Zealanders create for themselves (and I can think of at last three more screw-ups they voted for), this one will leave a legacy we will all regret.

      • Frank, you are showing your age. What you are describing may have happened in your era and for that matter mine but time has moved on (unfortunately). Students from all countries are keen to travel once they have completed their study and interest free loans make this affordable.

        I suspect many students are taking out interest free loans to study for qualifications for which there is no demand.

        The worst thing that happened was to remove interest totally from these loans – a large number of students will learn nothing about managing money if it costs them nothing.

  7. Personally feel that your first degree should be free. Prior to 1989 there were no student fees and no student loans. We have been going down hill from there.

    in the old days for example if you were a teacher you had a free education but had to stay in the country for x amount of years. You returned your debt to society.

    The most important thing someone can have is an education. Unlike money, it can never be lost or taken away from you. As a society being educated to a high level will bring a country out of poverty.

    We need to raise our aspirations to what is important.

    One thing I disagree with though is the capital gains tax. Most people just won’t pay it, as usual only the honest people will be effected.

    There are other ways to tax property that can not be evaded such as a stamp duty – since most of the housing problems are due to immigration – that is a lot fairer than targeting taxes on a local who already pays them.

    Also just saw today that 79,000 immigrants over 50 years have come in, under the parent category. In 10 years they can get super without ever having paid tax and of course health is free too for them.

    While being in general pro immigration, I am astonished that migrants can come into our country and get everything for free without having to pay tax while we penalise the locals (such as student loans etc) and then instead of putting laws into place to protect our tax dollars we just look at targeting those already paying their share, while jumping up and down if anyone asks questions about immigration controls.

    Migrants should at least have to have full health insurance and private super to come here and you should have to have paid taxes to become a resident.

  8. A student loan is just an investment: in intellectual equity.

    If a person wishes to make that investment in himself or herself then it’s a matter of personal choice and that person should not expect say, a truck driver working a 60 hour week to pay for that student loan in his taxes. Surely even the Loony Left can see that?

    For those who have built successful careers on the basis of this investment all is well, however a lot of students have chosen poorly in their courses and amassed large student debts studying ‘soft subjects’ which have little or no commercial value in the real world and so have difficulty paying back their loans and may begrudge the payments. I suppose the answer to that would be better career advice. Alternatively the govt could consider restricting access to loans for worthless degrees. Now that would upset the ‘luvvies’ in academia! 🙂

    • Hmmm, you’ve utterly failed to present your case, Andrew.

      You’ve ignored the massive debt placed on young New Zealanders, and the flow-on social-economic effects. Par for course for your rightwingers living in la la land.

      Education is not a commodity, it is the basic building block upon which a society is based. Mess with that, and the consequences will be dire. Forcing graduates overseas through high debt does not help us one iota.

      Go watch some reality TV. I’m wasting my time on people like you.

      • Frank, you’re utterly clueless as usual:

        Firstly this massive debt hasn’t been “placed” on young New Zealanders” they took it voluntarily hopefully with the aim of advancing themselves but for some I suspect it was just to fool around and then to try and skip paying the loan back.

        Secondly the topic of this thread is ‘student loans’ so the fiscal aspect is exactly what we’re talking about here. Try to stick to the topic. Attempts to deflect when your outdated dogma is found wanting just won’t do.

      • Frank, I agree with Andrew. Students are taking courses for which the employment opportunities are not great and ordinary taxpayers pick up the tab for the loans.

        I do not agree with interest free loans as this does not help young people to manage money.

        • Grant, re; “I do not agree with interest free loans as this does not help young people to manage money.”

          That never seemed to be a problem when we had free tertiary education, was it?

          Indeed, I can name you art least two fellas who received free University tuition (prior to 1992); never paid a cent back; and both went on to become very wealthy men. One is worth (monetarily) around $55 million. Can you guess who he is?

          So free education seems to have imparted some skills to “manage money”.

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