Would you borrow free money?

[Rambuchan]

I think there are many clarifications needed Ainwood. I mean how much is the loan in total??? You get $3000 up front, then a 150 monthly drip feed, but for how long? And until what level of debt has been reached?

 

[ainwood]

Mmm, I have to say, people's responses will be different if you don't disclose the circumstances, ainwood. Is that really what you want - an inaccurate poll?

Well, they're disclosed now.

The fact is, student debt in this tiny little country is insane - in the billions and billions of dollars. So while this may be a controversial proposal, I believe that the benefits of it FAR outweigh the possible downsides.

- LP

Agreed - but the problem is that this policy was supposed to "slay the debt monster" - it will actually make it BIGGER!

That's why its irresponsible.

 

[stormbind]

@Ainwood, it is a very common financing scheme marketed in the UK as a Soft Loan. They typically incur interest equal to inflation, but some incur no interest. They are awarded to Students, Researchers, and for Business Projects provided certain criteria are met (i.e. creation of jobs, shared risk, &c.)

Similar loans may also available in the UK from those banks which respect Sharia Law (i.e. HSBC) which stipulates that profit cannot be made from money - so interest is outlawed.

An interest free bank overdraft is also similar. I know people who literally live on such an overdraft, have done so for many years, and even bought a house while doing so

I have had a Soft Loan before, but they are not free - only a grant is free

Because they have appealed to me before, the honest answer has to be YES, but the value of any loan is directly proportional to the value of the investment. Debts of any description can create numerous complications, forcing the use of contingency plans incurring the use of additional funds, risk, time or resources. Careful planning is always important to me, and I would seek to share risks with a suitable partner.

 

[Lord Parkin]

BTW - I guess techinically under the electoral act we need to be very careful not to do anything that may influence voters from midnight until 7:00PM tomorrow. I guess we both need to change our sigs....

I don't think so. The internet is really hardly relevant to the election... after all, it's not like they close down all the various party websites on election day, or ban all election related pop-up ads on various supportive sites. It's only direct advertising, in New Zealand, that people would be forced to see on election day whether they like it or not, which is illegal. If you choose to go and look for advertisements, no-one's stopping you (indeed, no-one can!). It's just like, having a poster of Helen or Don in your bedroom on election day isn't illegal. (Though, that WOULD be kind of freaky if people actually do that... )

Vote early. Vote often.

Err...?

 

[ainwood]

I don't think so. The internet is really hardly relevant to the election... after all, it's not like they close down all the various party websites on election day, or ban all election related pop-up ads on various supportive sites. It's only direct advertising, in New Zealand, that people would be forced to see on election day whether they like it or not, which is illegal. If you choose to go and look for advertisements, no-one's stopping you (indeed, no-one can!). It's just like, having a poster of Helen or Don in your bedroom on election day isn't illegal. (Though, that WOULD be kind of freaky if people actually do that... )

The 'in new zealand' is the key - people have checked with the electoral commission, and been told they're not allowed to blog on political issues.

 

[thisispete]

I don't want to put this forum at risk, so I've changed my signature to a neutral term. I'm still a bit iffy over whether NZ law applies to forums hosted in overseas jurisdictions, but I doubt anything I say now will change the minds of voters.

I do know that my local paper will not be publishing any letters to the editor tomorrow that relate to politics.

 

[Lord Parkin]

Really? I didn't know that... Thanks for that snippet of info... though I don't really advertise political stuff anyway (couldn't care less, that's their job not mine), so it won't be a problem.

 

[ainwood]

I think there are many clarifications needed Ainwood. I mean how much is the loan in total??? You get $3000 up front, then a 150 monthly drip feed, but for how long? And until what level of debt has been reached?

Its a student loans scheme.

Current scheme: Borrow course fees (around $3000-ish), plus living costs of $150 / week whilst studying. You pay no interest whilst studying, but get 7% (high - but the official NZ interest rate is currently 6.95%) when you leave uni. Once you start earning over $16558 / annum (which is less than the minimum wage for a full-time employee, BTW), you have to pay the loan back at $0.10/dollar over this threshold.

Proposed scheme: Same lending, but zero interest.


Currently, there is an incentive to pay-back the loan faster via voluntary lump-sum payments - the interest. I believe that if there is no interest, then people will be much less inclined to pay it back at any accelerated rate - they will pay it back at the minimum, and hence total student debt will rise.

Secondly, we currently have about 55% of students taking out student loans. In our political spectrum, the left are saying that making loans interest free will only result in a moderate uptake in borrowing. The right say there will be a significant increase. I was trying to poll what people presented with zero interest loans would do.

 

[Lord Parkin]

I don't want to put this forum at risk, so I've changed my signature to a neutral term. I'm still a bit iffy over whether NZ law applies to forums posted in overseas jurisdictions, but I doubt anything I say now will change the minds of voters.

I highly doubt whether any person in parliament or government would be browsing in the Off-Topic section of CivFanatics on election day. (Though you never know... maybe we have a member here who is secretly Helen Clark, or Don Brash, or... Winston Peters? )

 

[a space oddity]

Slightly off-topic: Interestingly it seems that Islam doesn't *allow* lender to use interest.

On topic: A state-loan without interest has been used to finance students in the Netherlands for a long time. I have personal experience (although I had an additional grant too. ) Students that make use of the scheme pay back the money in 15 years.

 

[Lord Parkin]

Secondly, we currently have about 55% of students taking out student loans.

I thought it was like, 69%? According to the the news the other night, anyway (can't remember if it was channel one or three)...

 

[Meleager]

Isn't this similar to hecs in australia?
we have had hecs for years. essentially the goverment pays for your uni course. I dont need to pay anything upfront. but once i make more than $30k i begin paying it in tax.
it has worked very well here.

 

[ainwood]

I thought it was like, 69%? According to the the news the other night, anyway (can't remember if it was channel one or three)...

Yes - the 69% figure is what is in the treasury report, although the actual uptake is reported at 55%. I wonder if its that 55% of students have a loan, and the average borrowing for these people is 69% of the maximum? The 55% having a loan would certainly tie better with the numbers with allowances....

 

[thisispete]

I highly doubt whether any person in parliament or government would be browsing in the Off-Topic section of CivFanatics on election day. (Though you never know... maybe we have a member here who is secretly Helen Clark, or Don Brash, or... Winston Peters? )

I think they might be a little preoccupied.

 

[slip79]

The $3000 goes straight to the learning institution where you are taking the course. YOU never see that money.

Anyway.... voting tomorrow. joy... have to cast a special vote cos i'm in jafa-land and not in wellywood....

god luck to all the participants in the election tomorrow.

 

[IglooDame]

I don't think it helps Ainwood's survey any, but as to the initial "would you borrow money if it was interest-free" I'd say no if I was actually going to use it as credit. I would say yes, though, if I could invest it and then use the income from the investment to pay back the loan (probably keeping the $3000 block as untouched principal and throwing the $150/mo back as loan paydown for as long as it lasts, and by then hopefully I'll be on a net positive for investment income vs loan payments).

 

[Nobody]

I should mention that its (say) $3000 up-front, and the rest is drip-fed (150 a week)

Its 1000 up-front but you can get this every year. The drip feeding would stop if there was a universal student allowance. I mean people get a universal dole if there to lazy to work, but if you dont work to educate yourself you have to pay it back. That is crap.

Also your argument that the money should be in trade. My freind got a student loan to go to Weltec (a polytec in wellington) and lots of other people do.

I am against droping intrest on Student loans totally, because there needs to be some incentive pay it back, but from a personal point of view at the end of next year my loan will start incuring intrest i would prefer it if it didnt.

Hows about free tertiary education, or the loan repayments are fully tax deductable(as education is a bussiness expense, you need it to work.) this means as you pay tax everycent is taken from your student loan until you pay it off. If you want to leave New Zealand you need to pay it stright away.

BTW - I guess techinically under the electoral act we need to be very careful not to do anything that may influence voters from midnight until 7:00PM tomorrow.

Its illegal to Campaign, but its ok to where bags ect, so i would say a signiture would be ok under the law.

I am going to go vote for labour when i get up. I hope they win, i am from wainuiomata a poorer area and as a poorer area i clearly are not mainstream and cant possiably vote for National. But i also hope winston gets back in just for comic relief. anyway to a Green-Act coliation.

 

[Rambuchan]

@ Ainwood: Thanks for the clarifications. I really think it boils down to whether the government and its agencies can afford to knock out these loans at 0% interest. With a large amount of people going to uni under such circumstances that could be a hefty financial undertaking for government. With a bit of interest (7%), at least the operating costs of issuing these loans may be covered.

It is also of some concern that the repayment salary threshold is so low. They are basically saying "commence repayments as soon as you get a job, any job (not a better paying one that a university degree has put you in a position to obtain)". In which case, it aint much of a helping hand to students entering the job market.

I think 0% would be a good option, if the Kiwi government can manage it, or wants to. It encourages kids to go to uni and this is good for the economy. Health & Education are of course the two best things a government can invest in for its long term economic prospects.

From a potential uni goer's point of view, I'd say I would take up the loan and go to uni. The 0% would swing it for me. (Contrary to what I voted)



The British government operates such a scheme. I have had a student loan hanging around for at least 4 years now and have not been obliged to make repayments until recently (when I crossed the salary threshold, slightly above the national average I believe). This is accruing lower interest than any other loan you can get in Britain afaik. I have very much just left this ticking over as I'll never get money cheaper.

 

[stormbind]

The British government operates such a scheme. I have had a student loan hanging around for at least 4 years now and have not been obliged to make repayments until recently (when I crossed the salary threshold, slightly above the national average I believe).

That same evil sons of b-- lender, broke their own contract and then sued me before I crossed the f-- threshold: It is a revolting hurled entity from the bowls of stinking hell!

 

[Keshik]

Yes I would. In fact, this is how I bought my truck. 0% financing for 60 months. It's a no-brainer.