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Increase in inflation adjustment rate bad news

Forty seven percent increase in inflation adjustment rate bad news for students

The Aotearoa Tertiary Students' Association (ATSA) notes that the reduction in the base interest rate (from 5.1% to 4.2%) means that debtors to the Student Loan Scheme eligible for base interest right-offs will face increases in their total debt burden.

"While students may have some cause for slight satisfaction that the government continues to maintain the total student loan interest rate at seven percent, the balancing of the base and interest adjustment rates to maintain this 'headline rate' is unsatisfactory, and hides one of the real faults of the student loan scheme," ATSA President Julie Pettett sated today. "What it means to student loan borrowers on low incomes is that they will have a smaller amount written off their interest than was formerly the case."

ATSA suggests that 47 percent increase in the CPI (from 1.9% to 2.8%) used to calculate the 'interest adjustment rate' should be used to adjust the repayment thresholds which trigger base interest right offs. "This would help signal to borrowers that the government was genuinely interested in reducing the debt burden imposed on students, their families and the community," Pettett stated. "In the case of this latest change, it would increase the repayment threshold from $15,964 to $23,467. This is still well below the average wage, but would help to reduce the actual cost increases that low income borrowers now face because of base interest rate reduction."

ATSA expects that real movements towards reducing the costs of tertiary education to students will be offered in the government's review of student financial support "This latest change in the interest rate calculations illustrates some of the absurd contradictions in the current scheme," Pettett concluded.

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