Maharey backs students’ call to banks

Associate Minister of Education (Tertiary Education) Steve Maharey is supporting a call by a national students’ organisation for banks to stop taking into account the size of a persons’ student loan when considering their application for a mortgage or other finance.

The New Zealand University Students’ Association today released a survey of banks that raised the prospect that some banks were still continuing to assess finance applications on the basis of total debt, rather than a person’s repayment obligations.

Steve Maharey said that this practice was not appropriate as the Student Loan Scheme was an income-contingent repayment system.

“No borrower needs to pay more than a fixed proportion of their income over a set threshold, no matter how large or small their loan is. If that means that the debt is never repaid, then the balance is written off upon death.

“In terms of a borrowers’ ability to service other financial obligations, what matters is therefore the fact that they have a loan and the size of their repayment obligations, which are determined by their income.

“The possibility that this represented an administrative error was raised by the Banking Ombudsman as early as 1997, and I intend to meet with her soon to discuss what can be done to encourage banks to develop nationally consistent policies about how to treat Student Loan debt.

“This issue illustrates the continuing confusion that surrounds the Student Loan Scheme. Many people see the Student Loan Scheme as a debt in the conventional sense, and a great deal of anxiety and difficulty flows from this. The government has embarked on a Review of Student Support and we intend to reform the current system in a way that makes its income-contingent features clearer,” said Steve Maharey

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