Banks question student funding

Press, 1 June 1989, Page 1

Banks question student funding

By

ENNY LONG

Banks are likely to reject the Government’s proposal that they fund loans for students’ tertiary fees.

A spokesman for the Bankers’ Association, which represents 13 registered banks, said yesterday that banks did not feel they should be asked to bear some of the risk and expense of funding tertiary education.

The Government announced in February that tertiary fees would be dramatically increased — to about $lBOO a year — from next year. Students who could not readily pay the fee would be able to take out a loan.

The Government hoped that banks would give the loans under Government guarantee. If the Government had to fund the loans scheme, as seemed increasingly likely, it would not represent such a saving to its tertiary education budget.

The chief executive of the Bankers’ Association, Mr Simon Carlaw, said the association had not been consulted to any extent on whether the national banking

system was an appropriate delivery system “for what the Government had apparently decided it should do.”

“If you’re going to fund tertiary education, I think it reasonable to say that members of the banking association don’t see why the banking sector should be asked to bear some of the risks and expense,” Mr Carlaw said.

The banks have been given 21 working days to respond to a request to commit themselves to the student loans scheme. “This is the first communication we have had on the subject this year, and we have been given until the end of June to respond,” Mr Carlaw said. He emphasised that he had not studied the proposal in detail. “But a great number of key issues remain unanswered.” These included’ the nature of Government guarantees and available securities. “I understand from one of our member banks, which is active in giving (tertiary fee) loans in its home country, that there is a very, very high default rate on

those loans.” - Mr Carlaw said a lot more exploration and detail was required, and it should be provided, by the Government.

"The Government should do the investigation. I don’t see why my members should spend money to identify the problem areas,” he said. The president of the New Zealand University Students’ Association, Mr Andrew Little, said the scheme’s cost to the Government would be increased enormously if it had to provide the initial capital, rather than having capital provided by banks. “Why doesn’t the Government simply fund the education system, rather than coming up with the funding for the loans?”

If the Government funded the loans system, there would be charges to cover the costs of administration, and the extra revenue the fees scheme was meant to supply would not fund so many extra student places, Mr Little said.

The Associate Minister of Education, Mr Goff, was unavailable for comment last evening.