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Ralph grew up in a $7m beachfront house in Auckland’s affluent Cheltenham. His Dad made “serious coin” working as a partner in a prominent law firm for 14 years, enough to retire when Ralph was in fifth form. Ralph has spent the last four years studying physiotherapy at AUT. Throughout those four years he has received a $170 a week student allowance because his parents’ joint income is below the $80 000 a year threshold.
 
This was an easy threshold for Ralph’s family to fall under, considering that his Dad had a reported income of $0 a year for the previous two years. Ralph does not have a student loan, but even without the allowance, money from his parents would have meant that he remained debt-free. He is obviously not the type of student whose time at university the Government intended to generously fund through the student allowance system. 
   But Ralph’s case provides just one relatively tame variation on the student allowance scam that is alarmingly common in New Zealand universities. Creative accounting allows many self-employed parents to present a low-income front, funnelling most of their money back into their business, into family trusts, or both. In another variation, students with separated parents can gain false declarations that they receive no support from and have no contact with one parent, their low income-earning other parent thus qualifying them for the allowance. Ironically it is often only the most privileged families that are able to hide much of their actual income and undeservedly gain a student allowance.
   The common defense for this practice is that you are simply making the most of a poorly designed system. If you can do it, and it’s not illegal, you should do it. Inherent in this reasoning is the assumption that Studylink has simply failed to remove the loopholes in its eligibility criteria. But is shutting out these less worthy recipients possible, or will the loopholes always exist?
   Leo is a fifth-year student from central North Island currently finishing a double degree at the University of Otago. While in a hall of residence in his first year Leo found out about friends receiving a student allowance because it appeared that their parents had low joint incomes. After doing some calculations Leo realised that he too might be eligible, so applied the next year, and has received an allowance of $160 to $170 ever since. 
   “They ask how much your parents earn. My Mum’s a nurse and only works two days a week, so she doesn’t earn that much, and my Dad owns a business so a lot of his money gets hidden away. You’ve got to submit IRD records, he employs himself, he writes his own salary, so writes his salary as $24 000 a year. Which is fucked, but yeah, so that’s primarily how I get it.”
   If not for the student allowance, Leo would have been given a weekly sum by his parents instead and would still have graduated debt-free. He finds it “kind of ratshit ripping them off like that, but I never really feel any guilt, because it’s gone through all the taxes and stuff so it seems legit.” His Dad had already structured his accounts to pay himself a small salary, for the obvious tax benefits. Leo cannot see how Studylink could change their processes to make him ineligible: “it’s just accountants, if they’re good enough they’ll sort something out.”
   Emerald is a fourth-year finalist in Otago and was educated at a private school in the North Island. She has received an allowance of around $170 a week for every year of her university career. Her Mum works as a nurse for a couple of days a week, and her Dad is a farmer and property developer. She receives the allowance because her parents’ joint income falls below the $80 000 threshold. This is because “a lot of money is put into farm trusts, so you can’t really see it. All the money that’s involved is put straight back into the business; it’s a bit of a sham. I don’t think my Dad planned for it to be like that, he’s sort of embarrassed we can do it. I know they’re not trying to dodge it; it just works out that it can happen. 
   “I know plenty of people who do it. All the people I know that get it but shouldn’t actually get it, it’s just trusts, so it doesn’t show … I don’t actually feel any guilt. I kind of know that for the rest of my life I’m going to be paying tax, probably the highest tax level, because I’ve got a degree, so I’m probably going to be earning good money.”
   Martin is a fifth-year Law/Commerce student who has compiled a student loan of around $45 000 in his time at Otago, but in the last two years followed the example of his older siblings to receive a student allowance of around $180 a week. “I get it because my old man got made redundant several years back and decided to go into business himself. His income, which he pays himself out, is low because he purposely puts all his money back into the business. I’ve heard of others putting it into trusts – think he may do that also. The result is that my parents’ joint income is really low, although my old man holds a shitload of assets.
   “What steps should Studylink take? Well to be honest I think that no one is actually doing anything that they are not entitled to do, so it’s not Studylink’s fault it’s rather a policy one. I think that it’s not worth spending the money policing the current system for those cheating it. The money is better spent on other students who actually need it, and moving towards universal student allowances.
   “I don’t feel any guilt about it, if all goes well then there is a real chance I will be at the higher end of the tax bracket as most students should be aiming for, so I will be paying for it eventually. I think we have to remember here that not so long ago tertiary education was free and now we as students are going to be coming out of university paying a large debt as well as paying higher taxes to cover that same growing elderly generation who got free education. No guilt at all.”
   Nelson is in his last year of a Law/Commerce double degree. Raised on a farm, he has received a student allowance of $120-$180 during his five years in Dunedin. During the years in which he received a smaller allowance, he received the surplus as a student loan. “People from farms can get student allowances easier, because their real income is probably a lot higher, but a lot of their spending on the farm is before tax rather than after tax, so things like petrol costs, if you need a new laptop, then you put it through the farm’s books, get it tax-free and also it’s before tax, tax deductible. It’s legal and stuff, it’s not illegal at all, but I suppose it is taking advantage of the system, but you’re always going to have that when you have a means-tested allowance, there’s always going to be loopholes.
   “I can see why other people get pissed off about it, I used to try not to talk about that much, because they may come from a background where maybe the two parents are both teachers, so they might be worse off in real terms than us, but because they’re employed, they can’t really hide things like us. 
   “The area I come from, it’s a rural area, so a lot of people do it. I’m not from a wealthy background at all, at all, pretty middle class or whatever. I’ve heard of people from far wealthier backgrounds then me doing it. I’d be just over the threshold, whereas I know people from pretty wealthy backgrounds who have managed to do it; it’s just the way their businesses are operating. It can get quite messy with people a lot more wealthy, when you have trusts and everything, so what’s taxable income becomes quite a grey area … You’ve still obviously got to encourage people from poorer backgrounds to go to uni. I think they should keep the system and keep it means-tested. There are some people who are bending the rules a bit, but the overall cost probably outweighs the benefit of cutting them off.”
   The question of how common these cases are is a crucial but unanswerable one. It’s perhaps telling that it wasn’t that hard to find the above five people for this article, though, and each of them knows plenty of other people who have received a student allowance in a similar way. This would suggest that the problem is certainly prevalent enough to warrant serious concern on Studylink’s behalf. 
   Studylink were not keen for a phone interview, but sent through some answers to be attributed to Rachel Bruce, Head of Studylink:
   “Our message to everyone who receives financial support is that the Ministry of Social Development has a zero tolerance policy to fraud. In every case where we find planned or deliberate fraud, we will prosecute. Any student who attempts to obtain a Student Allowance by deliberately providing false or misleading information is committing fraud … Students who apply for a Student Allowance or a Student Loan must answer questions about their circumstances to enable us to assess their eligibility and entitlement. A false statement, or failure to advise of a change in circumstances resulting in overpayment, may result in prosecution … You have indicated you are aware of individuals who you believe are defrauding the Crown. If you do have information you are able to provide about specific students then we will look into it, as we do for all allegations.”
   Bruce is clearly quite eager to get across Studylink’s willingness to prosecute those who defraud the student allowance system, and cites their recent prosecution statistics: “in the last financial year the Ministry investigated 375 cases of fraud by students and established fraud debts of $536 806. Of these, 284 were for Student Allowance fraud and 91 for the living costs component of a student loan.” This is perhaps not such an astronomical figure when you consider that the five students mentioned in this story have between them received around $122 000 in student allowance payments during their time at university. Most people would agree that they are not the types of students for whom the student allowance is intended, but none of these students or their parents have really “deliberately provided false or misleading information” and thus made themselves candidates for fraud investigation. In most cases, they have simply provided Studylink with reports of their income; reports which have proved consistent after Studylink matched the data with figures held by Inland Revenue, Customs, Housing New Zealand, the Department of Internal Affairs, and the Department of Corrections. 
   None of the students Critic spoke to could offer any ideas on how Studylink could change the system to make students like themselves ineligible for a student allowance. Many of these families were already structuring their finances to receive greater tax benefits, so whether these cases are even within Studylink’s scope of policing is also questionable. In some of the provided examples, the $7000-a-year in student allowance payments would be less of a concern to the Government’s revenue collectors than the more straightforward cases of tax evasion.
   With all real family income declared, the students spoken to for this story would not be eligible for the student allowance. But rather than policy changes, it seems that the only thing that could stop families in such situations receiving the payments is a moral belief that to do so would be wrong. 
   Many families counter this with their argument that it will all even out eventually: the students’ degrees will soon have them earning in a tax bracket that will mean they ultimately pay back the allowance they once received and more. However, these convictions may prove empty if the students’ approach to paying taxes is the same as their parents’.