Dispelling Student Loan Myths

The SST has a useful article dispelling seven “myths” about student loans. I comment on them below:

1. You have an obligation to pay your loan back.

The SST is right that some people will never have to pay their loan back but they contribute to another myth – that a “failure to pay means the outstanding balance swells like a tumour”. Absolute crap – the loan balance will never ever increase in real terms once you stop studying. It will only increase by the rate of inflation which is not swelling like a tumour. This is widely misunderstood about the current scheme.

2. Women find it particularly hard to repay student loans.

The SST point out that NZUSA’s claim about women taking longer to pay off is not bearing out. Didn’t know that and is useful to know.

3. Higher education is a path to riches.

The SST claim that this is not true as six years after leaving study 25% of former students are earning under $10,000. I disagree with their analysis. The census and QES income shows very clearly that NZers with a degree will earn around $500,000 more in their lifetime than those who do not.

The SST includes references to those who do not graduate and this is misleading. Of course if you fail you papers and do not finish study then you will not be magically more likely to earn money. The more intelligent comparison is between those who do complete a degree and those who do not and there is a significant income gap.

4. Students are slack about money.

Agree with SST. Some are but many are not.

5. The poor have the biggest loans.

Again didn’t know this was a myth. Useful research

6. It takes most people decades to pay their loans back.

Great to see this myth debunked. NZUSA scare mongered with 51 years for a woman and 28 years for a man to repay their loans. In fact looking to be under ten years.

7. The interest-free policy means students will blow their loans on overseas holidays.

The SST point out living costs are no longer lump sum so it’s not as simple as blowing a big cheque twice a year, but that students can still make a lot of money by borrowing unnecessarily and making interest off the money.

Would have also been useful to debunk the myth about the average loan size. I am sure most NZers think it is $50,000 and in fact just a bit over $10,000 if I recall correctly.