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No-interest student loans: Tertiary 'Think Big'

31 March 2006

No-interest student loans: 'Think Big' meets the tertiary education sector

Writing off interest on student loans for New Zealand-residing graduates, which takes effect tomorrow, will cost millions but will not improve education quality or help disadvantaged students get to university, says Education Forum policy advisor Norman LaRocque.

The write-off of interest will cost hundreds of millions of dollars each year and will require the government to write off over a billion dollars in Crown assets. Despite that, it will not provide current students with one additional dollar or fund even one additional student in tertiary education.

Nor will it provide tertiary institutions with additional money to hire top-class academic staff or fund world-leading research, Mr LaRocque said.

Generally, university students come from higher-income families -- this policy is in effect a subsidy for such families. It does nothing to help those disadvantaged students struggling even to finish school.

The 'zero interest, zero sense' student loan interest policy will lead to more unnecessary student loan borrowing, the drying up of voluntary repayments and a ballooning in student loan debt, Mr LaRocque said.

"The policy change is nothing more than a latter day version of the 1970's Think Big policies. It will set back tertiary education policy by at least a decade.

"While some may celebrate this 'great leap backward', they should recognise that the consequences of this policy change will haunt the tertiary education sector for years to come."


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