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Government Says Interest Free Student Loans To Stay

Contributor:
Fuseworks Media
Fuseworks Media
John Key
John Key

By Kate Chapman of NZPA

The Government intends to keep student loans interest free despite the $11 billion loan book, Prime Minister John Key says.

But the Opposition think he is testing the water for bringing back interest on the loans.

Mr Key said economically the student loan scheme did not really stand up.

"For every dollar we spend we collect just 53 cents back."

Changes were made to make the system fairer to taxpayers who fund the scheme, he said.

They included requiring students to pass 50 percent of their courses, a lifetime limit on borrowing, a two-year waiting period for Australian and new permanent residents, a voluntary bonding scheme for health professionals and teachers, and an annual account fee.

The Government was also looking at ways of collecting money owed by borrowers who moved overseas.

The current cost of student loans was $408 million a year and rising, Mr Key said.

But the Government would not re-introduce interest on student loans, he said.

"That's my intention -- to keep interest free student loans."

Labour MP Grant Robertson said Mr Key was testing the waters over the issue of re-introducing interest on student loans.

"The PM's comments suggesting the interest free student loan scheme doesn't economically stack up show John Key's true feeling around the policy."

Mr Key was more worried about tertiary education debt than the quality of the education, Mr Robertson said.

"Mr Key is reverting back to investment banker mode and can only see the bottom line."

New Zealand Union of Student's Associations co-president David Do said he students agreed $11b in student debt was a disaster.

The Government should focus on reducing the need for the debt in the first place, he said.

"Putting interest back on student loans will take us back to unpopular and failed ideas which will see many years and millions of dollars added to the debt of hundreds of thousands of New Zealanders."

Interest free student loans were an investment in New Zealand's future, Mr Do said.

Business New Zealand chief executive Phil O'Reilly said interest free student loans were unsustainable and the policy should be reviewed.

The Government's changes were appropriate but further scrutiny of the $11b debt was needed, he said.

"Taxpayers need to know whether the public benefits outweigh the cost."

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