Thousands default on student loans

Thousands of people with student loans are defaulting on payments, leaving the Government to chase hundreds of millions of dollars.

More than one in five borrowers – or 114,000 people – have overdue payments and thousands of students are leaving tertiary education with no qualification and big bills.

The Education Ministry's student loan scheme annual report shows that $306 million in payments is overdue, a $100m increase from a year ago.

The substantial growth includes a big rise in the level of payments owed by people now living overseas, more than doubling to $114m.

New Zealand University Students Association co-president Sophia Blair said it was not surprising that students with loans were heading overseas and letting the bills mount. "You can earn higher wages [overseas]."

The student loan scheme made it difficult for people to pay back loans, which made it inevitable that debt would rise, she said.

Total student loan debt had reached $10.2 billion and is predicted to grow by an average of $875m a year to more than $20b by 2022.

The report also showed about 39 per cent of students who left tertiary education with a loan did so without achieving a qualification.

About 8000 students with loans who left study in 2005 had nothing to show for it by 2007.

Tertiary Education Minister Anne Tolley told a higher education summit in Wellington in July that the high number of Kiwis failing to complete their degrees represented a "wasted investment". She could not be reached for comment yesterday.

Ministry spokesman Rob McIntosh said not having a qualification did not mean students were not achieving.

"It cannot be implied that they have all not achieved their study goals. Some will defer completion to take a job, others will have acquired the skills and knowledge they sought."

But the figures were an issue that would be addressed, he said.

"This is not to say that qualification completion rates shouldn't improve – they can, and the Government has indicated it wants to see better completion rates."

Ms Blair said surveys showed people were not dropping out of courses because of the education they were getting, but rather for practical and financial reasons.

The recession was not helping the problem. "They can't get a part-time job to supplement their loan."

Improving completion rates needed to be given priority.

'No real licence to whinge'

Julia Moseley, 25, is in the middle of a van trip around Europe with her fiance after living and working in England for the past two years. Student loan payments were not a major concern at the moment.

"They are in my mind, but I have chosen to prioritise travelling and there's not a lot I can do to avoid the interest." She had not looked at a student loan statement for years and was in "firm denial", she said. "I have no real licence to whinge."

She had made some payments while living in Manchester but, after the first six months, had become exempt. This meant no payments were due, but the loan kept accruing interest. "I should be paying it off, though. I can't imagine how big my balance is by now."

She finished studying at Canterbury University in 2006, achieving a Bachelor of Arts with honours in political science.

'It's  a huge waste of money'

Bonnie Tai, 20, didn't even think about her loan when she quit Victoria University with one year to go on her Bachelor of Arts degree.

in religious studies and philosophy, she realised the degree was not likely to be of any use when she finished, she said.

"I wasn't sure what I'd actually do with that degree when I finished it." But when she saw her $14,000 student loan bill, she got a shock.

studying the loan had seemed far away. "You don't realise you actually have to pay it back."

is now studying journalism at Whitireia Polytechnic, and her loan has reached about $19,000. Anyone considering finishing without completing their qualification should think again, she said.

"It's actually a huge waste of money."

LOWDOWN ON BORROWING

Number of borrowers In New Zealand: 479,462

Overseas: 82,337

Overdue repayments In New Zealand: $192 million

Overseas: $114 million

Average loan: $16,213