Some facts about the student loan scheme

Posted By TEU on Oct 6, 2016 |


The New Zealand Union of Students Associations (NZUSA) says any government that puts interest back on student loans will be making a mistake.

Adding interest to student loans is one of the Productivity Commission’s key recommendations in its draft report on new models for tertiary education.

NZUSA has responded with a fact sheet on student loan interest.

It begins by noting that, although the government reports that it writes off 40 percent of loans under the scheme, only about half of this relates to the interest-free policy. Before loans were interest-free the government was already writing down up to 22 percent of loans.

NZUSA says the loans are overwhelmingly taken out by those for whom self-funding their study is not a possibility. Polytechnic and Private Training Enterprise students are much more likely to carry their loans for years, even though often their debt is lower, because their earnings are also lower.

The repayment requirement associated with the student loan debt has a significant impact on cash flow in the early years after graduation, with students reporting that it impacts on their saving, buying houses and having children.

Since adding interest will extend the repayment period, these impacts will go for longer.

NZUSA notes that before the interest-free policy women’s student loan repayment times were about twice that of men. Lower incomes and more time out of the workforce while the loan balance was increasing are the principal causes for this. With interest-free loans, women’s repayment times are only slightly higher than men.

Māori and Pasifika people also benefit from the interest-free loan scheme because of their lower average salaries and wages.

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