Brain drain blamed on student loans

September 22, 2000

New Zealand's student loan system is driving graduates overseas, with the number of borrowers leaving the country almost doubling in just one year.

The exodus is causing difficulties in collecting debt repayments, as graduates living overseas are harder to track down, and has left New Zealand with a skills shortage.

Michael Cullen, New Zealand's minister of finance, has revealed that 10,344 former students absent from New Zealand owed NZ$135.9 million (Pounds 41 million) as at April, compared with 5,942 who owed NZ$71.2 million a year earlier.

In a separate report, the conservative opposition party, ACT, said that 9,562 qualified people had fled New Zealand since the November election, costing the economy NZ$969.5 million in lost income and education and training bills. Critics are blaming the student loan scheme for the brain drain.

Student organisations say user-pays education is forcing graduates to chase higher wages in countries such as Australia, Britain and the United States to pay off their debts, particularly as the New Zealand dollar has fallen to new lows.

The average student loan is worth NZ$12,413 - more than three times higher than when the loan scheme began in 1993 - and the average woman with a bachelor's degree will take 28 years to pay off her tertiary debts.

Sam Huggard, co-president of the New Zealand University Students Association, said that the loan scheme should be scrapped. "People are going overseas to earn higher wages as it is much quicker (for them) to pay off their student loans than if they stay here."

ACT party researcher Grant McLachlan said professionals were leaving because they could not pay off their student loans if they stayed, following a hike in personal tax rates from 33 to 39 per cent on incomes over NZ$60,000.

Mr McLachlan said the loan scheme should stay, so long as the rest of the economic environment encouraged graduates to remain in New Zealand.

"It is now increasingly difficult for employers to find the skilled workers they need. Vacant positions are often filled with inexperienced people," he said.

The findings come as a parliamentary select committee investigates loan scheme changes this year that have wiped the 7 per cent interest rate and raised the income threshold from NZ$12,000 to NZ$24,000 before graduates must pay back their debts.

Concern is rising over the national debt mounting from the scheme. In June, the auditor-general said students would owe an estimated NZ$20 billion by 2024, and many would die from old age before paying off their debts.

Tertiary fees will be frozen next year for the first time in the history of user-pays.

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