Pee Kay
No Minister
Last week it was supermarkets, this week it is student debt/university fees. It seems there is absolutely no systemic crisis that our politicians can’t fix with a sweet, shiny new election campaign spreadsheet tweak.
Last week political parties all painted supermarkets as the whipping boy and took to flailing them with gusto. This week they are scattering lollies in front of a very receptive audience who, no doubt, will be very happy to trade debt for vote!
Last Sunday Chris Hipkins unveiled Labours plan new election proposal on student fees during the Labour Party’s official election campaign launch.
Labour will cut student debt. If you’ve finished your study and you’re still paying off a student loan, we’ll wipe 10 per cent off what you owe on 1 April 2027. And for every student who comes after, if you stay in New Zealand for three years after you finish your study, we’ll also wipe 10 per cent off what you owe.”
Proposing to carve into this massive liability, Labour’s plan is estimated to cost taxpayers $583.4 million over five years, with a massive $439.5 million hit falling in the first year alone just to clear historical balances. Is this not a clear indication of how our political class cynically choose to ignore the consequences of election bribes?
To move $500 million dollars off student ledgers does nothing but add further burden onto Joe Blow taxpayer and proves, once again, that our venal politicians would bankrupt taxpayers with an uncollectable, multi-billion dollar black hole rather than look the universities, and their students, in the eye and fix this broken, inflated, tertiary fees system.
Labour’s latest desperate stunt to write off 10 per cent of student loan balances is a typical, cynical play for the youth vote ahead of the November election. Hipkins made sure he was seen on TVNZ news addressing a sympathetic audience when he visited the University of Canterbury in Christchurch a couple of days after announcing the policy.
Surprise, surprise. Students enthusiastically endorsed the plan to hand them free money. Just as children would vote overwhelmingly in favour of ice cream for dinner, and dogs, unsurprisingly, would support the abolishment of the lead! Naturally Hipkins treats this “positive feedback” as a profound political endorsement, rather than the predictable reality of human nature. When a politician offers to wipe away your debt using other people’s money, you are always going to cheer!
What makes it all the more galling is that it is a page ripped straight out of the same tired playbook that gave us Jacinda Ardern’s, heavily promoted during her 2017 campaign but disastrous, “First-Year Fees-Free” scheme. We all know that was a multi-million dollar policy that did absolutely nothing to improve equity as she claimed it would, did nothing to lift tertiary participation, but hey, it did a wonderful job of garnering student votes while at the same time proving that educational failure can always be papered over if you throw enough taxpayer cash at it.
This latest policy isn’t political leadership: it is a temporary financial bribe that papers over decades of political neglect of our education debt.
But we must be fair here, Labour isn’t the only party throwing the education lollies around. Unsurprisingly, minor parties are gleefully mimicking Labour, offering their own brand of financial hand-outs or ideological windfalls that prove just how politically weaponised university fees have become.
On the left, the Green Party makes Hipkins’ 10 per cent discount look stingy by requiring complete debt-free tertiary education and a total phase out of student loans. Wow, totally free tertiary education… at what cost?
The Māori Party wants to give student allowances to everyone, regardless of how much their parents earn and completely wipe your student debt if you stay and work in New Zealand for five years.
Meanwhile, the right-wing parties offer structural alternatives, but they still highlight the total lack of long-term economic thinking across the spectrum on the subject of tertiary fees. While National has countered with a proposal to lower the compulsory repayment rate from 12 per cent to 10 per cent, on the populist front, NZ First pushes an accelerated regional bonding scheme, offering to wipe the debt of graduates who stay in the country, with faster write-offs for those who move to stagnating regional sectors facing critical worker shortages.
ACT’s counter strategy is built on a basic principle: stop forcing students to buy what they don’t want or don’t use. On top of tuition, every student is hit with a mandatory “Student Services Fee” that funds campus gyms, clubs, and bloated student unions. ACT wants to make this fee completely optional. If you don’t use the gym or support the union, you keep your cash. They reckon this straightforward change puts up to $4,000 back into a student’s pocket over a three-year degree, while forcing campus unions to actually earn their keep instead of living off a guaranteed handout.
But in actuality all of the above options on tertiary fees do not hide the fact that our pollies treat taxpayer funds as a bottomless piggy bank, doubling down on the same failed subsidies that drove up the cost of degrees in the first place.
The peak of this political farce is the staggering hypocrisy of it all. Tertiary education in New Zealand effectively stopped being free in 1990, when Geoffrey Palmer’s Labour government introduced uniform tuition fees, closely followed by National slamming the door shut with the Student Loan Scheme in 1992.
Many of the very politicians who currently sit, or have sat, in parliament drafting these cynical election bribes are the exact demographic who breezed through university completely fee free. They enjoyed a golden era of fully taxpayer-funded degrees and universal student allowances, with zero debt at the end.
Yet, having climbed the ladder to success on the public purse, they immediately kicked the ladder away for future generations. For over three decades, successive cohorts of older politicians have comfortably voted to saddle young Kiwis with a compounding billion dollar debt mountain, turning tertiary education into an inescapable financial trap while pretending they are doing students a favour with a measly 10 per cent discount!
Across the entire political spectrum, no party clamouring for your vote is willing to address the elephant in the room: why university administration and tuition costs are super-inflating in the first place. Instead, we are left with a bidding war of short-term bribes.
While politicians treat tertiary education as a pre-election candy shop, they are actively hiding a fiscal time bomb.
What all parties never mention is that New Zealand’s student loan scheme is fundamentally broken. According to Inland Revenue data, the total outstanding student loan debt in New Zealand has reached a staggering $16.9 billion. That represents an amazing 8.8 per cent of the country’s entire Net Core Crown Debt.
Ten years ago, the national student debt pile sat at $15.3 billion. Today, it has blown out to that worrying $16.9 billion, and the scary part is that it’s growing, despite the fact that fewer new students are entering the scheme. Individual balances are ballooning fast, meaning the average Kiwi graduate is walking out of university into a much deeper financial hole than their predecessors.
Don’t let the politicians fool you into thinking a $1.6 billion increase over 10 years is a win. It most definitely is not. It is a massive red flag. We should be absolutely terrified about where this trajectory is heading. This isn’t just slow growth: it’s a runaway train heading straight for a $25 billion black hole by 2036. When individual debt expands this fast while the system shrinks, it tells you, quite clearly, our tertiary funding model is essentially broken.
Instead of facing reality, successive governments continue to play creative accounting games, classifying this incredible $16.9 billion debt mountain as a “Crown Asset” on the government balance sheet. Yes, money owed can be classed as an asset, but in this case, that can only be termed a ‘financial fiction’. How can a burgeoning debt be classed as an asset?
Politicians craftily disguise a $16.9 billion debt mountain as a “Crown asset” yet they are happy to give away hundreds of millions of that asset via pre-election promises.
When Labour reduces a loan balance, the borrower owes less, and the government writes off some of that asset. It’s as simple as that.
Allowing that debt to increase and then happily writing off large portions is wilful fiscal ineptitude.
Labour’s proposal to write off 10 per cent of student loan balances is estimated to cost nearly $600 million over five years, with $439.5 million of that impact hitting the books immediately in the 2026/27 financial year.
That governments treat uncollectable debt from overseas defaulters and compounding interest penalties as assets is only papering over a black hole that is on track to breach $25 billion by 2036. Whether it is Labour’s cynical 10 per cent write-off bribe, National’s minor repayment tweaks, or the minor parties’ endless spending demands, everyone is ignoring the elephant in the room.
They refuse to address rapidly inflating university costs, choosing instead to manipulate the books and pass the true multi-billion-dollar taxpayer liability to the next generation.
The sad truth is that politicians are playing us for fools, treating a massive student loan crisis like it’s just a game of Monopoly. Moving numbers around on a spreadsheet doesn’t magically make hundreds of millions of dollars vanish. They are just hiding the fact that the whole system is bankrupt.
It’s time to stop the cynical bribes, stop the creative accounting, and finally fix the broken system that lets university debt skyrocket out of control. If we want a simple starting point to fix this mess, look at vice chancellors’ salaries.
University vice-chancellors are pocketing high-flying CEO level money. Former finance minister Grant Robertson receives a massive package somewhere between $629,000 and $645,000 at Otago. The head of Auckland University does even better, raking in $827,000. Bringing these distended salaries back down to reality would be a good place to start.
If we don’t stand up and demand real structural change now, we are flat out robbing our children’s future to pay for today’s political PR stunts, and the taxpayers will be the ones sent straight to jail without passing GO.
This article was originally published by No Minister.
