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Six Billion Reasons To Rethink Loans

Six Billion Reasons To Rethink Loans

Reports that student loan debt has hit $6 billion shows the need for urgent changes to reduce non-recoverable loan debt, overall indebtedness, and to enable faster repayment, ACT New Zealand Tertiary Education Spokesman Deborah Coddington said today.

"The Loan Scheme's annual report puts the level of doubtful debt, which is likely to be written off, at 11.4 percent of total student debt - meaning that around $700 million, financed by working families, will never be repaid," Miss Coddington said.

"There has recently been publicity about retired people taking loans, which everyone knows will never be repaid. The latest report says 1.27 percent - around 5,000 - of borrowers are over 55. Meanwhile, there are difficulties pursuing debts from those who emigrate.

"Urgent attention is needed to return the scheme to its original intention - helping young people study. Also, there must be a way to help them repay their loans more rapidly on completion of study - rather than the average time of 10 years.

"The sort of measures which should be considered immediately include:

· Restricting access to loans to those with a reasonable prospect of repaying;

· Introducing a minimum repayment of $15 a week (similar to child support);

· Lowering the income threshold for repayments to enable faster repayment;

· Legally defining student loan debt as social security debt to enable collection from defaulters by overseas authorities under reciprocal agreements;

· Capping total levels of loan debt to a maximum level;

· Offering alternative `bonding' arrangements, whereby students can access a portion of the loan in the form of a grant in return for agreeing to work in New Zealand for a number of years.

"I am calling on Tertiary Education Minister Steve Maharey to take action. He has sat on his hands for four years while this scheme has spun out of control, and debt has more than doubled," Miss Coddington said.

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