Student loan payments

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Forums › Finance and wealth management › Student loan payments

Mark

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#113294 12-Jan-2013 12:04

What is with all the whinging from people expected to pay their debt?

I just read this Herald article http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10858618
And I'm stunned that someone would borrow so much money for a course and then want to welch out on paying?

I'd love to know what course he did and then what job he ended up in ...

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#743735 12-Jan-2013 12:15

He gained a Phd in medicine and became a taxi driver ofcourse ROFL I owe 14k but atleast I don't have any qualms about trying to atleast pay some of it back when I can

but on a more serious note had you actually read the article you would have seen this....... "After a degree in political science and a postgraduate diploma in commerce, Mr Fraher worked in insurance. He said he had done well in his career and wanted to repay his loan, but the system had made it difficult."

Kyanar

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#743748 12-Jan-2013 13:00

I think one of the biggest problems with student loans is the - technically illegal - penalties. The government goes and whines about South Auckland loan sharks a lot, but if for any reason your loan starts incurring penalties (and it's not necessarily intentional!) then suddenly the government becomes no better than a South Auckland loan shark, charging you something in the order of 1.5% penalty interest a month - compounding. They've even got handy charts showing you how much they will rip you off if you don't pay the entire amount.

The argument in that article is quite valid - the IRD is ridiculously stubborn on what form a repayment plan may take, and in all cases, it's simply not viable for a middle to lower class individual to meet the IRD's requirements. Back when I was a bit behind on a bill, the IRD refused to accept anything less than 20% of my income on the basis that they didn't consider any of my existing commitments "valid". To them, you pay your rent and buy food - anything else is fair game for them. They even told me to evict my mother and get someone paying in (you can imagine the sort of response that got).

blair003

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#743771 12-Jan-2013 14:38

I read that article and thought the guy sounded like a bit of a plonker. Not sure if it was just a badly written article or what, but two points were if he moved to Australia the minimum payment required on his student loan would decrease compared to if he stayed in NZ, and if he only made the minimum payment the loan balance would go up as the payments wouldn't cover the interest on his loan.

Why doesn't the guy just pay an amount more than the minimum payment?

In any event, I don't think incurring a $70k student loan debt for a political science degree was a very bright idea to begin with.

Mark

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#743859 12-Jan-2013 20:35

Ahh .. missed the bit where they said what he studied and whatnot ... usual excuses apply I guess, rushing, using mobile to view etc ;-)

I don't get why penalties are illegal though ? Surely he agreed to the contract he was signing ?

I'll admit I'm from the era in the UK where you could earn grants from the government to cover the course costs and accommodation so I only racked up a 1500GBP student loan during my 6 years at uni (I did my stint at McD's as well mind :-), which I then paid off as quick as I could. I just struggle to understand how people sign themselves up for huge amounts of debt .. even at 18 I'd think most people should think twice!

Then again when there are so many fluffy courses being run buy the various institutes it kind of means that anyone qualifies for something now no matter how clueless they might really be :-(

JimmyH

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#743864 12-Jan-2013 20:48

Kyanar: I think one of the biggest problems with student loans is the - technically illegal - penalties. [...]

Why do you think they are technically illegal? I thought that the penalty regime was set out in legislation which means that it is, definitionally, legal?

sbiddle

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#743868 12-Jan-2013 21:03

After I read the story there was only one impression I got - somebody who is doing all he possibly can to ensure he doesn't actually have to pay off this loan, but paying the bare minimum required.

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reven

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#743876 12-Jan-2013 21:11

im all for it, if you borrow the money you should pay it back simple as that. and if you get a 70k student loan, you expect to be in a job that pays well, otherwise its not really worth it.

sure the penalties might be strict, not to bad IMO. but the bonuses are also really good. If you pay over $500 a year extra you earn 10% credit of the extra you paid back, eg if i pay an extra $5000 a year, $5500 is actually taken off my loan. so I could have borrowed $5500 and only paid back $5000 (free money!!!).

interest free + 10% bonus == awesome.

my loan was about $36k. was paying standard payments out of my paycheck, then i decided to pay it all off (didnt want that debt when I had a mortgage as well), took about a year and paid about $18000 and $1800 was taken off for free.

student loans in NZ are really good, theres a lot worse places in the world to live.

mattwnz

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#743890 12-Jan-2013 21:36

I thought the government had removed that incentive in the last budget.

I think the student loan scheme was one of the worst decisions that was made as it has led to many people leaving nz and they won't return otherwise they will be hit by a huge bill. If I was in that situation I wouldn't have returned. Almost my entire year at uni are now working overseas.

macuser

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#743892 12-Jan-2013 21:49

Why do they have so many degrees that don't actually lead to employment, Universities seem to be pumping out more and more graduates with no responsibility to helping students understand that their degrees don't get jobs. Doesn't the tax payer pay for 70% of tuition fees? I've heard that a lot of IP developed by post grad students doesn't even become utilized by the industries they're researching for due to bureaucracy.

mattwnz

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#743896 12-Jan-2013 22:13

Bonding graduates to work in NZ is an idea, in exchange for 100% of the fees being paid for.

JimmyH

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#743909 12-Jan-2013 22:40

mattwnz: I thought the government had removed that incentive in the last budget.

I think the student loan scheme was one of the worst decisions that was made as it has led to many people leaving nz and they won't return otherwise they will be hit by a huge bill. If I was in that situation I wouldn't have returned. Almost my entire year at uni are now working overseas.

Actually, I think that on balance the the deal is a generous one. The government picks up something like 2/3 of the costs of the degree through the EFTS system, gives anyone who meets the income test a student allowance, and advances the balance of the fees plus living costs as an interest free loan that doesn't have to be paid until you are earning to a certain level. It's actually one of the more generous schemes around the world.

Personally, if someone signs up for the deal and takes the money from the taxpayer and then skips the country to try and avoid repaying it then I think that's a pretty unethical thing to do. If they don't do what they should be in terms of meeting payments after they leave the country then I think that they should be pursued in the same way as if they had borrowed from a bank and then deliberately run away to avoid paying. It's a bad debt - it should hit their credit rating, any banks accounts or assets left here should be liable to court-ordered seizure, and they should be pursued by debt collectors.

If they don't like the deal, they shouldn't have signed up to it and taken the money! Which, remember, doesn't ultimately come from a big amorphous "gummint" but from taxes taken from the pockets of all new zealanders - many of whom are trying to feed families and earn a lot less than the cheeky sods ripping them off.

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mattwnz

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#743926 12-Jan-2013 23:47

JimmyH:

Personally, if someone signs up for the deal and takes the money from the taxpayer and then skips the country to try and avoid repaying it then I think that's a pretty unethical thing to do. If they don't do what they should be in terms of meeting payments after they leave the country then I think that they should be pursued in the same way as if they had borrowed from a bank and then deliberately run away to avoid paying. It's a bad debt - it should hit their credit rating, any banks accounts or assets left here should be liable to court-ordered seizure, and they should be pursued by debt collectors.

I agree. Perhaps that just says something about our younger generations. Personally I don't have a loan.
But that said, there are often better opportunities and jobs overseas, and better pay, which is the reason why many leave. Not paying back the loan is just the bonus for them, if they have no intention of ever returning to NZ, and probably shows flaws in the loan system.

itxtme

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#743983 13-Jan-2013 09:48

If you take out the emotion from your responses, what is more important is that the money is paid back. In my view there should be less of a push on penalties and more incentive to pay it back. I dont have the answers, but a system with repayment compliance of 90%+ is a better system than this one.

antoniosk

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#743985 13-Jan-2013 10:02

sbiddle: After I read the story there was only one impression I got - somebody who is doing all he possibly can to ensure he doesn't actually have to pay off this loan, but paying the bare minimum required.

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Antoniosk

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#743993 13-Jan-2013 10:23

mattwnz: Bonding graduates to work in NZ is an idea, in exchange for 100% of the fees being paid for.

I agree with this Idea it's what they used to do with trade apprenticeships when finished you worked for that company for usually 3~ 5 yrs and then you were free to do what ever you wanted..... but then you look at this guys quals and think errrrr WTF I can tell you for free the GOVT has made a hash of running the country for a lot less than the 70K it cost you

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