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Comments
on the Bill
NZACAB
would like to make comments on two of the matters being considered
by Inquiry. They are:
- the
current system of student fees, loans and allowances, specifically
relating to the loan and allowance application process of the
Department of Work and Income (DWI) and;
- the
future social and economic impacts of debt on students, their
families, and the community.
The strengths and weaknesses of the current system of student fees,
loans and allowances – NZACAB experience of the loan application
process
During
the student loan and allowance application process this year many
students approached NZACAB after failing to have their applications
processed properly and successfully. Students came to us seeking
help with chasing up application delays, as well as asking for emergency
assistance such as foodbanks and help with rent.
These
cases below highlight some typical situations that bureau saw regularly
during the previous enrolment period. These cases illustrate WINZ’s
inadequate system to process applications in a timely and user-friendly
manner. Some cases also show that WINZ staff, themselves, did not
understand the process. They also serve as a reminder to the Committee
of the stress and hardship on students caused by the failure of
WINZ’s processes, and highlights the need for DWI to ‘get
it right’ next time.
A
student visited a WINZ office asking for a Student Loan application
form. She was told to ring the 0800 call centre. She received,
completed and returned the application, only to have it returned
with a covering letter saying it was incomplete. She did this
again four more times, each with the same result. At no time was
she informed about what information was missing from her application.
She continued to submit applications and receive letters rejecting
these; it reached a point where she did not know which rejection
letter went with which application. CAB workers contacted the
Palmerston North centre but were unable to clarify the status
of her application. And so by the time her course commenced she
did not have an approved loan.
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In
May 1999, a student applied for an allowance; his application
was later rejected in July. He then completed the necessary forms
for WINZ to review his application. In August, after having no
response from WINZ, the student approached his local CAB.
The CAB worker contacted a WINZ liaison officer, who then went
to talk with the case manager. The liaison officer found the review
application sitting, unprocessed, on the case manager’s desk.
The case manager admitted that he didn’t know what to do
with them.
The forms were sent to the Palmerston North service centre. The
CAB worker attempted to keep track of progress with the centre.
The CAB worker also had to arrange a food parcel for the student
and to advocate to the student’s landlord, who had been threatening
eviction.
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A
very distressed client came to CAB after having difficulties with
WINZ’s processing of her husband’s student allowance.
The family was relying on the allowance to pay some basic costs
of living. CAB contacted the local Member of Parliament to take
action and we also arranged for a food parcel for the family.
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A
student paid her course fees from a personal loan because of delays
with WINZ’s processing her loan application. Her application
was finally processed after her course began. WINZ said they would
pay her course-related costs, but not her fees, as they had already
been paid. On WINZ’s advice she sought a credit from the
institution, so that WINZ could then pay her fees.
Later in the year the student was told that her exam results were
withheld because her fees had not, in fact, been paid. WINZ then
told her that it was not policy to cover fees that had been paid.
The student had already paid back the personal loan, assuming
WINZ would pay her fees. She then had to obtain another personal
loan to re-pay the fees.
Many
of these cases were compounded by WINZ failing to adequately provide
interim emergency benefits such as the Special Needs Grant, which
many students were clearly entitled to.
NZACAB
is cautiously optimistic with the Minister’s determination
that DWI must get student loans processing right for next year,
and is pleased with the recent commitment of DWI’s Chief Executive
to ensure that they do.
The
future social and economic impacts of student debt, including the
sustainability of the scheme
The
cases above clearly show that in the short-term the student loan
scheme has created hardship for many students. Other submitters
are better placed to comment on longer-term implications of the
loan scheme; for example, the quality of education, the ‘brain
drain’ and broader resourcing options for the tertiary sector.
NZACAB
is able to confirm, through our own national statistics, a clear
trend throughout the community towards a greater need for budgeting
advice and emergency assistance:
- over
the past 3 years there has consistently been 16,000 - 17,000 enquiries
for budget assistance, and;
- between
1998 and 1999, an increase in requests for emergency assistance
from13,900 to 15,200.
NZACAB
cannot confirm a direct link between student debt burden and the
increasing demand for emergency assistance and budget advice. We
do, however, wish to sound a word of warning about the increasing
debt burden placed on students and their families.
A
report by the Auditor-general cites the estimate that 90 per cent
of people with loans will only settle their debt by the age of 65
(cited in The Dominion, 28 June 2000). And that by 2024 students
will owe an estimated 20 billion dollars. There is plenty of evidence
showing how increasing debt compounds the problems of poverty (Downtown
Community Ministry, 1999, Too Poor To Help: How welfare debt
is replacing welfare). NZACAB is extremely concerned how the
prospect of debt acts as a major deterrent to further study for
many low-income families. Many commentators are also predicting
that the loan debt will discourage students from buying homes or
even to remain in New Zealand.
NZACAB
wish the Committee to consider the issue of information provision
for those considering taking up a student loan. Related to all types
of loan and credit agreements is the matter of ‘do people know
what they are getting in to’? How much information do they
have about the loan in terms of interest rates, fees, repayment
commitments, penalties and so on?
The
Ministry of Consumer Affairs is addressing these issues currently
in its review of consumer credit law (see for example MCA's discussion
document, "Transparency in Consumer Credit: Interest, fees
and disclosure", April 2000). There are a number of options
that the Committee could consider that ensure students are fully
informed of the longer-term implications of a student loan:
- More
detailed and simple information in the DWI pack sent to students
that lay out the costs associated with loan, especially the estimated
average time it takes to pay off a loan.
- Greater
education and information provision targeted at those people likely
to take up loans, especially senior secondary school students
and their parents.
- An
on-line ‘calculator’, similar to those of mortgage brokers
and banks, which allows students to calculate the likely costs
and repayments of the loan.
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