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Hi everyone,
We haven’t done a bleg in a while – so I think its time to bring up a new one. I’m wondering what good history books are out there. They can be about any period in history, focused on any part or portion of a historical incidence, the key is that they provide a good descriptive discussion of whatever it is.
In the 2005 election the Labour Government found itself in a very tight battle to retain power. In order to mobilise the student vote, Labour promised interest free student loans. The bribe assisted Labour in returning to Government for their third consecutive term.
At the time National called the interest free loan scheme “irresponsible”. Since coming to power in 2008, however, they have maintained the policy, presumably for similarly cynical political reasons as led to the policy being introduced in the first instance.
As a result of the policy, students have been encouraged to borrow more and pay back less. Debt has ballooned. There are obviously other factors to take into account, such as increasing student numbers during the economic downturn. Nonetheless, it is clear that when given the option of borrowing interest free money, those with student loans have limited incentive to pay anymore than the minimum from their loan, for which they might as well borrow the maximum.
What is National’s response to the perceived student loan problem? The introduction of a $50 administrative fee that student loan borrowers must pay annually. Note that National have also provided an incentive for students to voluntarily pay back their loans through a 10% discount on their loans.
I propose a rather simpler solution. Abolish the half measures currently in place and start charging interest on student loans again. Only then will the correct incentives be instilled.
Hot off the press from NBER, I was particularily interested in one of the main conclusions from the abstract:
Results from a rudimentary instrumental variables strategy and accounting for whether sex is immediately preceded by alcohol use suggest that binge drinking directly leads to risky sex. Some binge drinking-induced promiscuity seems to occur among students, especially males, involved in long-term relationships
I could have told you that without doing any econometrics!
Note: I have read nothing but the abstract so can’t comment on the actual econometrics carried out!