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A Dunedin academic says New Zealand can't afford an interest-free student loan scheme.
With student debt standing at just under $12 billion and most of that interest free, the government has indicated it will look at chasing that money in the Budget.
Associate Professor Paul Hansen from Otago University's School of Economics says New Zealand can't afford to have an interest-free student loan scheme in this or any economic climate.
He told TV ONE's Breakfast making any debt interest free is really an incentive for students to borrow more and take longer to pay it back.
Hansen said the government is in dire straits with its deficit so it's looking around for any money that it can save.
However he doesn't expect significant changes to the loan scheme with the election looming and about 600,000 people with student loans.
"In many respects that would be political suicide to tamper significantly with that," he said.
But Hansen said a small percentage interest, at least, should be put back on student loans.
"Currently there's not even an interest payment to cover the rate of inflation. Australia, as far as I can tell, charges inflation at least."
Hansen also said it's not necessarily good that student loans have kept people in the country or boosted numbers entering tertiary education.
He said the choice of tertiary education is made much easier for people when it's heavily subsidised.
"It's not a good thing if people going to university aren't studying things that are worthwhile, or have a good chance of getting good jobs," he said. "It's not surprising that everyone wants to go to university. Who wouldn't?"
He defined worthwhile jobs as those that pay good wages, have good prospects in the future and that the country needs.
He said graduates are clearly not good at repaying student loans.
'They're taking their time and who would blame them? What's the incentive? if you've got a debt now, the best thing you can hope for is as high inflation as possible and just wait it out as inflation erodes the value of your debt," he said.
The government has signalled it is likely to target student loan
borrowers who are living overseas and not paying back anything on
their loans. It has also foreshadowed cutting living cost
allowances for students aged over 55.
What do you think? Have your say on the messageboard below.
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chrisinus said on 2011-06-06 @ 10:28 NZDT: Report abusive post
Most of the students who are overseas are there because they're having problems living in NZ with low salaries and very high taxes but rip-off costs of living. If you want to keep them here, NZ needs to increase salaries and taxes to match those in Australia and UK. Then they would continue to pay their loans and new laws wouldn't be necessary. KEEP UP WITH THE WORLD, NZ!!!
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JayKay22 said on 2011-05-21 @ 21:12 NZDT: Report abusive post
Why take away all course related costs for part-time students - why not simply halve it instead - make the entitlement $500 instead of $1000. That makes far more sense.
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pioneer said on 2011-05-20 @ 12:04 NZDT: Report abusive post
TO MANY FAMILIES WANT HAND OUTS. THE FAMILY ON TELEVISION LAST NIGHT HAD 5 CHILDREN AND A DOG THE CHILDREN WERE OLD ENOUGH FOR THE MOTHER TO GET A JOB PLUS SHE HAD SPENT MONEY ON A STUPID TATTOO IF YOU CAN'T AFFORD CHILDREN DON'T BREED AND EXPECT THE COUNTRY TO BORROW FROM CHINA AND jAPAN FOR THEM. WE HAD 3 CHILDREN I WORKED AT NIGHT AND IN THE WEEKEND WHILE THEY WERE BABIES UNTIL THEY WENT TO SCHOOL THEN WORKED PARTIME 1 IS A SOLICITOR,2 A CEO IN AUS,3 BUSINESS MANAGER
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big2al said on 2011-05-20 @ 09:06 NZDT: Report abusive post
As usual with a Nat govt, the only ideas they can come up with are selling the family jewels (SOE's) which we already know is only a short term gain & a long term loss (NZ Rail) and cutting public services. A billion dollars lol, where do they think the money is coming from? Essential services & jobs will be cut, which will lead to more spending pressure on WINZ as more unemployment benefits are paid. No matter how this Govt cleans it up, it is the poor & middle income earners who suffer.
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smithy said on 2011-05-20 @ 07:48 NZDT: Report abusive post
It may lack flair and inspiration but I think it is a very sensible budget given the economic climate. I dread to think where we would be with Labour in charge who have not yet made a valid argument on any subject
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Post new commentJemimaNZ said on 2011-05-19 @ 11:54 NZDT: Report abusive post
You have got to be joking. If the government would consider closing the wage gap so we stood to earn more from getting a degree then sure, then maybe we could pay them off faster rather than having to jump the ditch to get a decent paying job. Putting interest back on student loans will just point out the obvious - what's the point in getting an education, we're only going to get paid the same as those who don't anyway.
phenominc said on 2011-05-19 @ 11:52 NZDT: Report abusive post
All I can say is, I'm grateful that I studied when I did to avoid student loan interest. I probably wouldn't of gone to University if interest was added. Now, I have my degree and an Industry job and have paid half of my loan off. So yeah, thanks Aunty Helen. At least it worked for one of us!
clavinee said on 2011-05-04 @ 03:16 NZDT: Report abusive post
Very nice article. Thanks for pointing the good and bad sides of credit card debt. It is difficult to stop students from borrowing their own private student loans since they think it is their way to get their education. However, paying their debt is another issue after college. I do hope the government can find means to help both themselves and the students involved.
bladeslapper said on 2011-04-18 @ 12:16 NZDT: Report abusive post
Is it possible for the kiwi Gov to get student re payments through your pay as we do in nz but in say Aus? all kiwis would be happy to pay off loans but its bloody hard when away! Also for example in the aviation industry, there are NO jobs in NZ so the trip to aus is the next step.... The average salary for a first time pilot kiwi or aussy is about $25 - $30,000 working 100-120 hours a fortnight. doesnt leave much to send home! How ever in aus they have a similar scheme for "Hex" (student loan