Govt plans to tighten student loan scheme

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The interest-free student loans policy will be changed, with the Tertiary Education Minister admitting it was "a political call" to back it at the 2008 election.

"We're going to keep the student loan interest-free, but then we're going to look at other requirements around those student loans," Steven Joyce said.

"The simple point is, if you don't pay interest on any loan – forget student loans for a second – then there is less incentive to pay it back than if you do pay interest."

The comments from Joyce, appointed Tertiary Education Minister in a minor Cabinet reshuffle late last month, have been welcomed by some sector leaders eager for change.

Yesterday, New Zealand Vice-Chancellors Committee chairman Derek McCormack called for the Government to be bold regarding student loans.

"Economically, it would be sensible to have interest on the loans."

McCormack also called for a review of university entry requirements, with universities facing record demand for places this year.

"While we've got constrained resources, let's make sure that they go to the students that are most likely to succeed."

The Government has already signalled in its Tertiary Education Strategy that it wants to make students more accountable for performance.

Prime Minister John Key said in his statement to Parliament last week that the Government would take "a careful look" at student loans and allowances to "ensure that taxpayers' generosity is not being exploited".

Joyce said there was evidence some people were making poor use of their loans, which cost the Government and the student.

Official figures show the total student loan book held by Inland Revenue was $9.109 billion last year – well ahead of the $3.415b in 2000.

There were 561,799 people with a loan – a 5.9 per cent increase on the previous year.

Joyce said the Government remained committed to interest-free loans.

"We committed before the election and we believe in keeping our word on this sort of stuff," he said.

Joyce, who was National's election campaign manager in 2005 and 2008, admitted "it was a political call" to endorse the policy in 2008.

Industry Training Federation executive director Jeremy Baker said the loans scheme was "enormously expensive" and needed to be reviewed.

New Zealand Union of Students' Associations co-president Pene Delaney said tightening eligibility for loans and allowances would hit students who were already struggling to make ends meet.

BY THE NUMBERS

The average total loan balance per student last year was $16,213.

The total loan book held by Inland Revenue last year was $9.109 billion – well ahead of the $3.415b in 2000.

There were 561,799 people with an outstanding loan last year – a 5.9 per cent increase on the year before.

As at June last year, $306m in overdue loan repayments were outstanding.

Repayments totalling $452.1m were taken directly from employees' salaries last year.

A further $167m was received in voluntary repayments.

The median amount borrowed in a year has grown every year to $6953 in 2008.