Over 50,000 Graduates Benefit From Loan Reduction
17 April 2002
Over 50,000 Graduates Benefit From Loan Reduction Scheme
A scheme to ensure graduates reduce the principal on their student loan as well as repaying interest delivered real benefits in its first year of operation, Associate Education (Tertiary Education) Minister Steve Maharey said today.
The "50%-to-principal" scheme is one of a series of measures introduced to help former and current students repay their student loans and keep them at a manageable level. Under the "50%-to-principal" scheme the base interest charge on a loan is limited to 50% of the repayment obligation. Where a borrower's base interest charge in any income year exceeds 50% of their annual repayment obligation, the base interest charge is reduced to that amount.
Steve Maharey said in the 2000-01 tax year 51,650 graduates received write-offs under the "50%-to-principal" scheme totalling $31.7 million.
"The reduction in student debt which the "50%-to-principal" scheme has ensured is very encouraging.
"The "50%-to-principal" changes were introduced in the Student Loan Amendment Act 2000 along with the abolition of interest for full-time and part-time low-income students. They are part of a package introduced to combat student debt levels that had previously spiralled out of control.
"Graduates can see that they're making real progress to reduce their debt under this scheme as the principal is being reduced as well as interest being repaid," Steve Maharey said.
Since 1 April 2000 four categories of borrowers have qualified for an interest write-off on their student loans. Full-time and part-time students who are still studying may qualify to have their full interest charges written off. Borrowers who are employed but earning low incomes may also qualify for interest write-offs.