Labour’s Student Loan Calculator
I have been checking the output of Labour’s student loan calculator and my initial findings are that it appears to be seriously incorrect. I understand that the calculator has not been put together by Treasury, IRD or Ministry of Education, but by Labour Party staff. I call on Labour to release the formulas the calculator uses.
Here are examples of where it appears to be wildly wrong:
They claim that someone with a $15,000 loan balance who earns $34,300, and stays earning that much would take 25.5 years to repay their loan and have interest of $11,891. Plug it in and you will see.
If one goes to sorted.org.nz and plug in a $15,000 loan balance and $34,300 income it says it is paid off in 12 years 4 months and interest is $6,805 in today’s dollars.
So Labour’s calculator is claiming it will take 25 years instead of 12 under current policy. This is not a small error – this is almost electoral fraud. Now sorted.org is a neutral site from the Retirement Commissioner so I trust their calculator more.
We can go to the IRD calculator also which will tell you the repayments on $34,300 income and $15,000 loan will be $1771.20 a year. Now even if one totally ignores the fact that you may get interest writeoff, a simple calculation of 7% interest on $15000 shows inital interest of $1050 in the first year vs repayments of $1,771 shows the loan paid off in 14 years approx, not 25.
Here is another example. Say a $15,000 loan balance and annual salary of $27,000 growing by 2% per annum. Labour’s calculator says it will take 40 years to repay and interest of $27,693.
The Retirement Commissioner says 18 years 7 months and interest of $10,417. I plugged in a salary today of $27,000 and income in five years of $29,800 based on 2% growth.
I am happy for someone to point out if my comparisons and calculations are wrong and that Labour’s calculator is more correct than the Retirement Commissioner’s and IRD’s. The best thing would be to get Treasury and IRD to verify Labour’s calculator. They should so so immediately.
UPDATE: Bill English and his staff have also been checking out the calculator and have found Labour’s calculator out by 30% to 50%. Unless Labour can provide proof that their sums are accurate, their credibility will be zero.