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Student loan interest still above market rates

Student loan interest still above market rates

Student loan interest rates released today for 2003/4 are still higher than some commercial interest rates for home loans, say the New Zealand University Students' Association (NZUSA).

"Seven percent interest on student loans is nothing for government to brag about," said NZUSA Co-President Roz Connelly. "A quick look on the Bank of New Zealand website shows mortgage interest rates of 5.99% - a full 1% lower than what the Government is charging its own citizens for getting an education."

"Cullen and Maharey's promises of a review into student loan policy are little comfort for graduates who see that their repayments are barely covering interest," said Connelly. "Student loan borrowers are cynical about whether government cares about them when private businesses are offering their clients more favourable terms. "

The components of the interest rate have also changed for the worse, with the inflation adjustment rising from 1.9% to 2.8%. This means that borrowers who are not earning will see their loan rise by nearly 1% more this year than last year.

The effects of the student loan scheme are far wider than individual loan balances at IRD, student loans have perverse social consequences as well. "Student loans are clearly a factor in our declining birth rates," said NZUSA Co-President Fleur Fitzsimons. "It's no wonder that graduates are putting off having babies, when they're punished with nearly 3% a year interest on their loans when they take time out of the workforce to have and care for children."

"Interest on loans is bad for our economy and our society," said Fitzsimons. "The government cut interest for current student but continues to punish graduates in the workforce and those raising the next generation. We don't need more reviews. We need a fairer education system and increased funding."

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