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Student loan changes will hit low income earners - union

Published: 10:12AM Friday May 04, 2012 Source: ONE News

The Government's proposed changes to student loans will hit low income earners the hardest, the student union says.

Tertiary Education Minister Steven Joyce confirmed yesterday the Government will increase the student loan repayment threshold from 10% to 12% of incomes for graduates earning more than $19,084.

New Zealand University Students' Association president Pete Hodkinson told TV ONE's Breakfast this morning the issue does not lie with the amount of the increase, it is at what point it comes into effect.

"We have a system where the repayment threshold is at $19,084, which is below the poverty line for a lot of students," he said.

"It's not the students earning between $40,000 and $80,000 a year we are worried about, it's the students that are between $19,000 and $30,000 for who that is a significant issue."

Hodkinson said graduates still need enough money to buy food, pay the rent, and in some cases support families, and that even a slight change will tighten already tight budgets.

Joyce said the proposed changes are fair because New Zealand's student support system is already very generous, and will not cut funding to the tertiary sector.

Changing the repayment amount will not only encourage students to pay back their loans faster, but will allow the Government to invest money back into the tertiary sector, Joyce said.

"The way to do that is to ask graduates to pay back a little bit more money earlier, to pay off their student loans quicker, so we can take that money and invest it in those that are coming after them."

Hodkinson said he accepts this is a period of financial crisis, but said now is not the time to make education more expensive.

"It's the perfect time to invest in education so that people are developing skills, improving their potential, and are able to fill the jobs when they are there for them."

Allowance tightened

In his pre-budget speech on Tuesday, John Key announced student loans would be kept interest-free, a change the Labour government put in place in 2006, but said the money spent in the tertiary sector would be "rebalanced".

Joyce announced yesterday student allowances would only be available for the first 200 weeks of study, and there would also be a four-year freeze on the parental income threshold for allowances.

Hodkinson said changes to allowances will "disincentivise" people from returning to further study.

Hodkinson said there is an expectation that once a student completes their bachelor's degree and enters into post-graduate study, they will be earning more money so they should not be reliant on student allowances.

"If you ask a lot of post-graduate students whether they are earning more or less money since they were studying their bachelor's degree, it paints a rather grim picture."

Details of the full budget will be announced on May 24.