Student debt plan cuts pay by $30
The average double-income family will lose $30 a week from their pay packet – if they are among the more than 500,000 Kiwis with a share of the $13 billion of outstanding student loan debt.
The Government is also putting the brakes on the student allowance scheme, freezing the parental income threshold for four years and shutting the door on allowances for post-graduate students.
The changes – expected to improve the value of the loan book by $250 million and save the Government an additional $70m a year – were immediately panned by opposition MPs, who said they would put further financial pressure on Kiwis.
"Graduates are also parents, looking to buy homes and or start families. This will act as a disincentive for them to stay in New Zealand," Labour deputy leader Grant Robertson said.
The Government admitted "several thousand" students would lose access to an allowance as a result of the changes, but Prime Minister John Key yesterday downplayed the changes as "minor".
The changes, to be included in the May 24 Budget and revealed yesterday by Tertiary Education Minister Steven Joyce, are:
The compulsory student loan repayment rate to increase from 10 to 12 per cent of income over $19,084.
Likely cancellation from March next year of National's loan repayment incentive scheme, which offered a 10 per cent discount on voluntary repayments of more than $500.
A four-year freeze on the $55,027 parental income threshold for eligibility to student allowances.
Allowances for any study over four years cancelled.
Mr Joyce admitted that for those with student debt the changes would "look like a small tax increase" but they would typically pay off their loan four or five months more quickly. Increasing the repayment rate allowed the Government to invest more, sooner, in wider tertiary education rather than in student support.
In Australia, automatic student loan repayments of 4 percent kick in at income of $48,000. However, it is charged on all of the income instead of the amount over $19,084 as in New Zealand. Student debt there is also adjusted for inflation.
"We've all got to understand that we're in very tight fiscal circumstances ... that's not going to change any time in the next three or four years," Mr Joyce said.
"We don't have any other means of investing in the tertiary system and we do have probably the most generous student support system in the developed world."
The changes to allowances mean students who wanted to study beyond four years would have to take on more student loan debt or find money from other sources, Mr Joyce said.
The parental income threshold for allowances had been increasing "rapidly" ahead of the rate of inflation. Freezing the threshold would bring it "back into balance over time".
Green Party spokeswoman Holly Walker said the former students affected were already shouldering "a completely unreasonable burden".
HOW MUCH MORE?
Automatic repayments on student debt will be charged at 12 per cent – instead of 10 per cent – of income over $19,084 a year.
$39,000 income $7.60 extra a week
$59,000 income $15 extra a week
$79,000 income $23 extra a week
$99,000 income $30 extra a week
- © Fairfax NZ News
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