Student loans 'a disaster'

Fresh calls have been made for interest to be reintroduced on student loans after Prime Minister John Key said student debt was a disaster economically for the Government.

"If you're an investment banker – not that I am these days – you'd say it's a disaster of a loan book," Key told students at Victoria University's Weir House yesterday.

"It's $11 billion, roughly, at the moment and we collect 53 cents in the dollar, that's it. Fifty-three cents in the dollar.

"If you just sat there, logically, you'd say there has to be a better way of doing it."

The Government has announced changes to tighten access to student loans.

Tertiary Education Minister Steven Joyce has admitted it was "a political call" for National to back interest-free student loans at the 2008 election and Key, in Opposition, described the policy as "irresponsible".

Key said yesterday that the policy was "politically charged" so it would stay. "But economically, it doesn't really stack up."

More than half a million New Zealanders have student debt and the policy to make loans interest-free was credited with winning Labour the 2005 election.

Chairman of the Vice-Chancellors Committee Derek McCormack said the Government should at least consider the idea of putting a low level of interest on to student debt.

"A low level of interest would net quite a significant amount of money, which could be reinvested into more places in tertiary education," McCormack said.

Changes announced in the May Budget were "fiddling rather than fixing" the scheme.

THE NUMBERS

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

In 2009/10, the Government expects to lend about $1.54b in student loans.

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

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

- © Fairfax NZ News