The great loan moan
EVERYONE loves to whinge about student loans; usually comparing them to a millstone, a noose, a boulder, or other variations on the theme of ‘crushing burden’. I’ve sat around this steaming crock of self-pity long enough to sniff the sickly stench of entitlement.
As John Clarke observed, we don’t know how lucky we are in this country.
The biggest financial asset anyone has is their lifetime earning capacity, and a tertiary qualification can double, triple, or quadruple that number. After nine years, people with a medical degree earn about $128,000 a year – more than three times the national median income of $37,600. It’s not just the doctor and lawyer-types making bank; it’s graduates in general. Even the likes of performance art grads eventually squeak past the median income.
That’s nice for those who find work, but the job market’s tough, right?
Actually, 97 per cent of graduates are in employment two years after graduation, and 92 per cent have job titles that seem befitting of their education level. Again, these are much better prospects than the general population enjoy.
For such a lucky and privileged bunch, graduates sure do moan a lot. The chief whinge is that uni used to be free. Now it’s only 70 per cent free, with the shortfall bridged by interest-free loans, and a weekly allowance for some students. How terrible!
To get some proper perspective, let’s stop using the word ‘free’ to refer to government services. We should always say ‘taxpayer-funded’ instead. Someone’s sweat and toil generated every last dollar that put you and me through university. Quite possibly that someone was stacking shelves at 123RF Pak’n’Save, or working three jobs to feed their kids.
Meanwhile, we enriched ourselves, both intellectually and financially. Over a lifetime, someone with a degree earns about $1.6 million more than a fellow worker with no qualifications beyond high school. Assuming the graduate had a ‘crushing’ student loan debt of $50,000, that’s still a 30x return on investment. The cherry on top is that as long as you’re in New Zealand, you can repay the loan at a snail’s pace and let inflation chip away at its value, without paying a cent of interest.
I’m not saying studying is a cakewalk. Fitting in assignments while working crappy part-time jobs and living on the smell of an oily rag is tough. But an incredible number of New Zealanders make it work, and reap the rewards.
The people who complain the loudest are usually those who have made a string of poor decisions – say, completing a degree in underwater-basket weaving, moving overseas to a low-paying job, and ignoring the loan interest until it’s blown up so big they can’t repay it.
Unless you’re studying for pure intellectual enlightenment, there needs to be some commercial payoff. Luckily it’s easy to do the homework these days – Careers NZ has a great tool where you can compare pay and employment prospects, and MBIE even has an app.
Higher study is the best investment a lot of people ever make, even if they don’t realise it. Of course, university is not for everyone. Tune in next week, and we’ll explore some of the lucrative career tracks that don’t involve a degree or a diploma.
‘ For such a lucky and privileged bunch, graduates sure do moan a lot. ’
Got a money question? Email Budget Buster at richard.meadows@thedeepdish.org, or hit him up on Twitter at @MeadowsRichard.