The downside: Cutting off a promising future

While there have been plenty of positives from the student loan scheme, some lower-income New Zealanders have been shut out of higher education because they couldn’t afford it, reducing their future earnings and weakening the economy. High-income households still capture most of the benefits of tertiary study.

There are also other downsides for those who did borrow — students having to move away from loved ones to land a job in the field they studied.

Economist Isabelle Sin has analysed all fulltime domestic students who completed bachelor’s degrees aged under 30 between 2005 and 2013 and found those with bigger student loans were much more likely to have a high-paying job. They were also more likely to move to another region in New Zealand to take a job.

“You have this debt hanging over your head, so you are more likely to get a job that is high-paying,” she says.

This has obvious benefits for the economy. But she also notes potential negative consequences of moving away from family and friends.

“Those graduating with large loans are less likely to go back to where their parents are, so they are giving up somewhere they’d like to live.”

High fees and loans also scare some people off acquiring knowledge and skills that could benefit the economy.

A 42-year-old Auckland mother, who asked not to be named, says she did one year of study in graphic design but did not go on to do a degree because of the cost. “As the youngest of four, my parents could not afford to pay for further education so I took a student loan,” she says.

“After one year I owed $8000, which was not huge in today’s terms, however I wanted to do a degree which was a further three years and I was sensible enough to realise I wanted to earn money and the debt horrified me.

“So I managed to get a job in a screen printing and copy centre with promises from my employer to on-thejob train me to work in the printing side. This did not eventuate.

“So years later, paying the minimum amount, I ended up in banking and had the opportunity to work double shifts at a contact centre and basically worked my butt off, and paid it including all the interest off.

“Do I regret not doing the degree, because I didn’t get the student loan? Yes. If student loans had been interestfree would I have continued? Possibly.”

A Wellington woman says she “was a straight-A student and encouraged to do honours by my faculty, but left to work instead because by the end of three years studying and working with no family support I literally didn’t have shoes that didn’t leak or clothes without holes in them”.

“My friends who did go on to do extensive post-grad are on much higher salaries or more ostensibly ‘senior’ roles, which happened much sooner in their careers,” she says.

“But there are too many variables around children, political choices and accidents of timing to untease that.

“Anecdotally, I can only know what was going on for me personally at that time.”