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Student loan policy benefits high income earners…

21 July 2005 Media Statement

How National's student loan policy benefits high income earners…


JOHN
John has a $30 000 loan, and earns $45,000 a year.
He makes a compulsory yearly repayment of $2,841, of which $2,100 initially goes towards interest charged on his loan balance.
John will receive a tax deduction of $693, which is based on a rebate of that $2,100 at his top marginal tax rate of 33%. This will now be used to pay off more of his loan.

DON
Don also has a $30 000 loan, but Ron earns $70,000 a year.
He makes a compulsory yearly repayment of $5,341, but, like John, $2,100 initially goes towards interest charged on his loan balance.
Don will receive a tax deduction of $819, which is based on a rebate of that $2,100 at his top marginal tax rate of 39%. This will now be used to pay off more of his loan.

RON
Ron also has a $30 000 loan, but Ron earns only $35,000 a year.
He makes a compulsory yearly repayment of $1,841, but he faces a reduced interest charge of $1,551 due to interest write-offs of $549.
Ron will receive a tax deduction of $326, which is based on a rebate of that $1,551 at his top marginal tax rate of 21%. This will now be used to pay off more of his loan.

SUE
Sue also has a $30,000 loan but earns nothing because she is at home looking after her two year old son.
She makes no repayments but her loan goes up by $840 per year because of inflation adjustments.
Sue will not receive a tax deduction.

ENDS

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