Government Hits Low Income Earners Again
The New Zealand University Students’ Association (NZUSA) is calling on the Government to explain the real impact of student loan policy after receiving documents released under the Official Information Act which show that low income or unemployed graduates will see their loans increase at a greater rate than in previous years.
“Steve Maharey trumpeted the fact that the overall interest rate was unchanged earlier this year,” said Andrew Campbell, NZUSA Co-President. “What he neglected to tell the public was that graduates who are unemployed, at home with children or in a low paid job will have less of their loan written off and will therefore face longer loan repayment times and increased loan debt”.
“We are very concerned that this change will be particularly bad for women graduates, who earn less than men and take time out of the workforce to have children. Women already take 27 years on average to pay off their loans – it could be even longer with these new rules”.
Cabinet papers released to NZUSA show that changes to the way student loan interest rates are calculated mean that some borrowers will only have interest written off at half the rate it was last year.
While the total rate was frozen at 7%, the balance of components within that debt has changed significantly. Last year, students below the repayment threshold and receiving 50/50 write offs had 6.1% of their interest written off. Students this year are only having 3.1% of their interest written off. This change is due to the higher inflation rate last year.
“Viewed alongside the recent changes to the Community Services Card it is clear that the Government is abandoning low income earners. The Government needs to reassess how interest is calculated to ensure that loans can be repaid quickly, and that policies to wipe interest for low income graduates actually write off the majority of their interest”.
Section of Cabinet paper on student loan interest calculations attached.