Going overseas, or trapped at home
In the first 13 years of the loan scheme there were claims it drove people overseas — to earn higher wages to pay off their loans faster and to escape the reach of Inland Revenue.
One person who left, who wants to stay anonymous, finished a master’s in architecture in the late 1990s when New Zealand was recovering from recession. “There was one architectural job advertised in two months in Auckland. There were 30 on one day in Melbourne. So I left,” he says.
He paid $19 a week on his $18,000 student loan, but only for two years. “Everyone was saying, ‘Don’t bother, don’t be stupid.’ So I thought, okay, I’ll just not pay, then, especially when I was switching flats and was short of cash,” he says.
His career prospered and he bought a house 10 years ago. But Inland Revenue caught up with him when he renewed his NZ passport, and his debt had ballooned with interest and penalties to $62,000.
He remortgaged and finally paid off the student loan three years ago. “It set me back years.”
A 2006 Ministry of Education analysis found that, after controlling for other factors, a higher student loan increased your chances of being overseas five years after leaving study. Only 9 per cent of those with loans under $8000, but 25 per cent of those with loans between $24,000 and $32,000, were overseas.
Helen Clark’s 2005 pre-election decision to stop charging interest on student loans for those who stayed in New Zealand after April 2006 dramatically reversed this effect.
A 2017 study of medical graduates reported that “the rate of NZ medical graduates seeking work overseas has plummeted”. Before 2006, 55 per cent of firstyear doctors were “considering leaving the country due to student loan debt”. But 94 to 98 per cent of final-year medical students in 2013 to 2017 wanted to stay in New Zealand.
Now that student loans start accumulating interest if you leave the country for more than six months, some feel “locked in”, afraid to do even the traditional two- or three-year “overseas experience”, and punished if they pursue a career abroad.
Damon Rusden, 25, has a $48,000 debt after trying out two other courses before settling on a degree in international relations at Victoria University and a goal of doing development work.
“Even growing up poor in New Zealand, I’ve always had this belief that in New Zealand we are privileged, so why not make a career out of using the education New Zealand has provided me to actually benefit others,” he says.
He took a fellowship in Nepal, but says it is very hard to get into development work, so now he is teaching English at a preschool in Vietnam earning US$1200 ($1900) a month. He has to pay $2000 every six months on his student loan.
“To me the interest is simply a penalty for those trying to build an international career.”
Dubai-based entrepreneur Shamim Kassibawi, whose family came to New Zealand as refugees from Sudan when she was young, studied at AUT.
“To be able to graduate with an international business major, you had to study abroad for six months or work abroad for a semester. I couldn’t afford to just go and study so I ended up working abroad in Dubai,” she says.
Kassibawi, 32, has started a series of businesses there in public relations and marketing. But she feels “demoralised” by a student loan that has grown, with interest, from $28,000 to almost $50,000.
“If you leave and try to make it big elsewhere, we will increase your student loan,” she says. “Travelling is so important. It brings so much back to NZ. I’m so angry about this whole system.”