Nats U-turn on interest free student loans

JOHN SELKIRK/Dominion Post

JOHN KEY: National's loss at the last election forced a re-think on student loans.

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National has bowed to the inevitable and endorsed Labour's interest free student loans policy that it vilified at the last election.

Leader John Key said half a million New Zealanders had interest free loans now, so it would impose a big cost on them to go back to charging interest.

Asked what had changed he said: "We lost the election."

National will make the loan scheme even more attractive by offering a 10 per cent bonus on early payments of more than $500 - in effect writing off part of the loan if it is paid early.

For example if someone pays $1000 off their loan over and above the compulsory payment requirement the Government would take $1100 off their loan balance, Mr Key said during a break in the party's three day caucus retreat in Rotorua.

Mr Key said the aim was to encourage young people make voluntary payments and so pay off loans faster.

He estimated the cost to the Government's accounts would be about $15 million.

National had said the original policy would encourage students to take on more debt, and the figures showed this had happened.

But the cost to the Government's books of about $3 billion would be loaded back on to the 500,000 with student loans if the policy was reversed.

Mr Key said the caucus had also discussed National's stance on Labour's Kiwisaver scheme but it was unlikely an announcement would be made at this retreat.

- © Fairfax NZ News