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Image: Archi Banal
Image: Archi Banal

BusinessJune 1, 2023

The silver lining to the cost of living crisis? It’s easier to pay off your student loan

Image: Archi Banal
Image: Archi Banal

While your grocery bills suggest otherwise, high inflation is not all bad news – especially if you’ve got a New Zealand student loan, Emma Vitz explains.

High inflation sucks. The price of lettuce appears to be doubling every time you go to the supermarket. People who bought into the property market during the sugar rush of 2020 and 2021 are now feeling the crash as interest rates bite. Adrian Orr is the new, much less reassuring Ashley Bloomfield of our time.  

Hidden among the high prices, however, is a small win for many New Zealanders that most of us aren’t even aware of. That win? Your student loans are being worn away by inflation. 

In New Zealand, we don’t apply indexation (adjustments to account for inflation) to student loans. This means that if you took out $10,000 of student loans in 2000, they would still cost you $10,000 to repay today, even though hourly wages have doubled since then. That’s inflation eroding the value of your student loan, and it makes it faster to pay off.

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New Zealand’s approach to student loans is fairly unusual. In Australia, indexation is applied to student loans once a year to maintain the real value of the debt that is owed to the government. Because inflation is so high right now, the indexation rate this year is 7.1%, which has many people panicking. 

In the UK, student loans are charged an interest rate of the retail price index (RPI – a measure of inflation) plus up to an extra 3%, depending on how much you earn. In response to RPI being as high as 14.2% in the past year, interest rates on student loans have been capped at 6.9%. 

So how much time and money is our unique approach saving borrowers in New Zealand?

According to the latest student loan scheme annual report, students who graduated in 2020 with a bachelor’s or graduate certificate/diploma had a median student loan balance of $35,940 at graduation. The median repayment time for these borrowers is projected to be 7.3 years. The median student loan balance was slightly higher for male students, but they are projected to pay it off a bit faster.

Using this information along with data on salaries for graduates, we can reverse engineer a payment trajectory that aligns with the overall results from the (much more sophisticated) model produced by the Ministry of Education using data from the IDI. We can then apply indexation to this to see how it would affect pay-off times.

I used the Consumer Price Index (CPI) to index the student loan balance on March 31 each year, to match the point in time where repayment thresholds (the amount of income you can earn before the 12% repayment rate kicks in) are currently adjusted. It would make more sense to use a measure of wage inflation to index student loans, since that is what is really eroding their value. However, other countries use CPI or something similar, so I decided to follow suit.

The results show that applying indexation would mean the average student took an extra year and a bit to pay off their student loan, and paid about $7,250 extra.

You can see that things would really heat up for a recent graduate in 2022 and 2023, when inflation spikes. Along with recent historical data, I used the RBNZ projections from the Monetary Policy Statement of May 2023 for future inflation. They forecast that inflation has peaked and will return to 2% in September 2025, which is why the loan balance increases by much less in the future. Of course, all of this is uncertain.

While the fact that the real value of student loans is being eroded faster due to high levels of inflation is a small win for borrowers, it also means that as the lender, the government is losing more money on the student loan scheme.

According to the Ministry of Education, in 2020/21, every dollar lent out as a student loan cost the government 32.75c. In 2021/22, this increased to 37.79c, reflecting the fact that the government is losing more money by not accounting for interest in a high-interest environment. The value of the student loan scheme to the government as a whole dropped by $1.67 billion between FY2021 and FY2022 because of changes in inflation and interest rates.

Recent graduates are being squeezed by a high cost of living, while simultaneously facing a labour market that might finally be slowing down. Whether or not you believe student loans should be indexed, those on the borrowing end of this equation will be glad that New Zealand is doing things differently.

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a purpletoned screenshot of facebook marketplace with a message saying "Hello, is this still available" on top
List an item on Marketplace and you will quickly be inundated with inquiries regarding the item’s availability (Image: Archi Banal)

InternetMay 31, 2023

Facebook Marketplace isn’t too good to be true

a purpletoned screenshot of facebook marketplace with a message saying "Hello, is this still available" on top
List an item on Marketplace and you will quickly be inundated with inquiries regarding the item’s availability (Image: Archi Banal)

In the first of a series investigating why we can’t just leave Facebook, Shanti Mathias takes a look at Facebook Marketplace, home of good deals and the new face of secondhand shopping.

“I do spend a lot of time scrolling through Marketplace,” Alex Growcott tells me over the phone. It’s part of her job as the manager of an op shop in Wellington, but she also peruses listings for her own pleasure. 

She recently found a set of long-coveted ceramic mixing bowls while scrolling on her flat’s wicker sofa, also sourced from Marketplace. “It’s quite fun to see what’s out there – like, I didn’t know that was a thing that existed, and Marketplace shows it to me.”

We’re now years into a glut of trend pieces declaring that Facebook is passé now, only used by older people who never cottoned on to Instagram, let alone TikTok or Snapchat. But many New Zealanders still have their Facebook accounts – and Marketplace is one of the reasons we keep logging on. 

two yellow ceramic bowls on a well lit kitchen bench
Alex Growcott’s bowls, found on Marketplace (Photo: supplied)

Marketplace is an online selling platform that is part of the Facebook app. It’s a little like Trade Me, in that anybody can make a listing. Scrolling through Marketplace recently, I found a huge variety of items, each appended with an automated call to action: “Send the seller a message – is this item still available?”. Someone in my area was selling boil up. Someone else was renting a room, with dim photos of cupboards. There were bars of Mr Beast chocolate for $10 a pop, sponsored ads for Temu, a Peppa Pig costume and vintage traffic lights. “Stolen from K’Road in the early 2000s,” the listing read. Wait, stolen? 

“Trading via social media offers dodgy users a level of anonymity to hide their identity and intentions,” a police spokesperson said when asked for comment on dodgy behaviours on Facebook Marketplace. There are a plethora of stories about Marketplace scams and violations of the Consumer Guarantees Act. Last week, for example, an Auckland woman was fined $13,000 for selling 11 cars in a year without a motor trading registration. 

Growcott, the op shop manager, says her experience of Marketplace has only been good so far. When she lists an item, she gets inquiries within minutes. Most people come in person to collect their goods, and pay with cash. “It’s the speed I like on Marketplace,” she says. “We don’t have space for everything in the op shop, so the faster it disappears the better.” Still, she recognises the risks inherent in such a loosely regulated shopping platform.

the facebook marketplace interfac sellling a digital camera and an art print
Marketplace: home to hundreds of items you never knew existed (Image: Screengrab/Shanti Mathias)

Creating a Facebook profile is quick and simple; people don’t necessarily need to use their real names. When the prices are good, buyers usually don’t always too many questions about where an item comes from. While it’s against Facebook’s rules to sell stolen items on Marketplace, the platform washes its hands of enforcement: they recommend that if you suspect something was stolen, you should get in touch with local law enforcement. In reality, though, there’s no way for users to tell if they’re getting a great deal or participating in a theft. People have been arrested for selling stolen items on Marketplace, but it’s impossible to tell how often it happens, as many times the use of the platform for this purpose won’t be reported. 

There are a range of regulations that govern online selling in New Zealand, but they don’t always apply to Facebook Marketplace, says Jessica Walker, communications and campaign manager at Consumer NZ. “The Consumer Guarantees Act only applies to people who are professional sellers,” Walker says. But on Facebook Marketplace, it’s not clear who is getting rid of a few things from their garage and who is making a living from selling things online – let alone whether either are registered as a business. 

the facebook logo on a black background
Marketplace: another reason to tap on your Facebook app (Getty Images)

“Facebook Marketplace can be the wild west,” Walker continues. “There’s no feedback system to assess sellers, there’s no way to verify addresses, there’s no one you can contact if it goes wrong.” While the thousands of listings certainly suggest that lots of people in Aotearoa are using Facebook Marketplace, there’s next to no local support – Marketplace is just one piece of Facebook’s huge operation, and while the company sells advertising to be placed among the listings, it doesn’t make any money from the transactions themselves.

With regard to regulations, Marketplace stands in clear contrast to its most obvious competitor, Trade Me. Founded in New Zealand – although now owned by a British company – Trade Me still runs all of its operations in New Zealand. “We’d be silly not to keep an eye on our competitors, but we’re focused on ensuring the things that are sold on our site are safe and legal,” said Lisa Stewart, Trade Me’s head of marketplace, in response to written questions. While not devoid of scams, Trade Me, unlike Facebook, has extensive customer support, and uses payment platforms like Ping to ensure that customers who have been ripped off can get their money back. Facebook Marketplace, which doesn’t have a payments platform, has no such option. 

Despite the risks, users see plenty of upsides to Facebook Marketplace. “It’s local, you can hone in on things in your area,” says Walker. “It’s like the new version of a garage sale – there’s a huge variety and it increases the accessibility of items people couldn’t get elsewhere.” Marketplace may not have the customer service that Trade Me offers, but it also doesn’t charge auction success fees, meaning items can be cheaper. For people like Growcott, who has used Marketplace to buy and sell furniture as she’s moved through different flats, the convenience of discovering local deals has been completely worth it. 

strewn textiles in a big pile
A pile of discarded clothing and textiles in Jakarta, Indonesia (Photo: Getty Images)

In some ways, Facebook Marketplace is an embodiment of the modern social media platform: a blend of commercial and social functions that monetises users’ attention while allowing them to commodify pieces of their own lives. On Facebook’s Messenger app, Marketplace messages are in a tab right next to messages from friends and family, placing the two interactions on a kind of even footing. 

The popularity of Marketplace in spite of its flaws may speak to a wider culture of consumption and commodification, says anthropologist Rachel Stansfield. She wrote her Masters thesis last year on the ethnography of an op shop – specifically, how morality and materiality permeate secondhand shopping. While she focused on in-person shopping, her findings demonstrate how enmeshed the world of the internet is in much of what is available to buy. For instance, some of her participants expressed distaste for Shein, the extremely cheap Chinese-based digital fashion retailer that relies on social media for sales, and doesn’t have any physical stores in New Zealand. “We see stuff from Shein, that ghastly place, coming through op shops,” she told me. “That started online.”

squiggly cash of 100 50 and 5 dollar notes in a pile
Facebook Marketplace sales are often made in person, with cash – difficult to trace and impossible for Facebook to monetise or guarantee. (Image: Getty/Tina Tiller)

Cheapness appeals to people, of course. “People like the fossicking, seeing it as a treasure hunt, not just a commodity,” says Stansfield. But it’s not just the promise of a good deal that causes people to donate clothing or sell it online. They’re looking for a moral reprieve, too. “People don’t want to feel like they’re throwing their stuff away,” Stansfield says. If they can’t sell it online, they’ll donate it to an op shop – and if the op shop can’t sell it, they’ll either throw it into landfill or send it overseas. New Zealand exports millions of dollars of worn clothing each year.

Of course, not everything sold on Facebook Marketplace is second hand, nor is it a good deal – or even necessarily legal. But its presence amid messages from your friends, invites to your cousin’s 21st and good vibes from your favourite reality TV discussion group make it easy to keep returning to Facebook, opening the door to the possibilities of Marketplace. 

If nothing else, Facebook Marketplace is a way to wonder about the lives of people you’d never meet otherwise. Alex Growcott has got used to arriving at a stranger’s house to pick up some niche item she’s sourced on Marketplace. “You just rock up to their house and embrace that it’s awkward,” she advises. But it’s the things she didn’t get to buy that stay with her. “It’s just fun and intriguing,” she says. “I saw someone selling a converted van from 2008 for 30 grand the other day. I thought they were dreaming for that price – but it made me wonder why they placed so much value on that item, if it was for the memories more than the usability.” Then she kept scrolling.

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