Parental Income Test Needs Urgent Attention

Child Poverty Action Group (CPAG) applauds Labour’s latest policy announcement for students as a much needed step in the right direction.

CPAG’s 2016 report Laybying our future: The state of student hardship in New Zealand, written by Max Lin, highlights very high levels of student hardship and the increasing problem of student debt.

“Students face same high costs of medical care, travel costs and food and housing, as everyone else, Their income support is woefully inadequate,” says Associate Professor Susan St John, CPAG economics spokesperson.

“It is worrying that so many are in hardship and that is impacting negatively on their education.”

Labour will boost the student allowance by $50 extra per week and increase the level of the living costs loan. This is  a good start but CPAG urges Labour to go further. CPAG’s student hardship report found that only one-third of students are eligible for a student allowance and that since 2010, 25% fewer students are able to access this support.

St John says that Labour will improve outcomes for post-graduate students by allowing them access to student allowances, but the parental income test also needs urgent attention.

“The stringent parental income test cuts out more students aged under 24 over time, because their parents earn too much for them to qualify for the student allowance,” says St John.

“Many more students exit tertiary study with greater debt because of having to borrow additional for living costs.

“Financial pressures cause them to become physically and mentally stressed and this impacts on their chances of educational success. They may turn to fringe lenders for additional income support, which has huge implications for their future financial well-being.”

Of great concern is that some of these students are already parents, and responsible financially for dependants of their own. If they are receiving a student allowance, they are denied the support of the In-Work Tax Credit (IWTC), a payment intended for children worth at least $72.50 per week.

CPAG challenges Labour to give these parents access to the $72.50 along with their other Working for Families (WFF) entitlements.

“Why should their children be denied this payment simply because study is not viewed as work?” asks St John.

The progressive move to three years of free tertiary education could be good, but will also make the debt situations of the current cohorts even more inequitable.  

“A well-designed programme of debt relief, and an increase in the threshold for loan repayment is required. Currently, for every dollar earned over $19,136, 12 cents is deducted for student loan repayments. This results in a huge effective marginal tax rate for those earning low-wages. It  is especially debilitating where there are children to support and WFF is also being reduced for each dollar over the low threshold.”