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National identifies loans policy loophole

Don Brash MP
National Party Leader

23 November 2005

National identifies loans policy loophole

National Party Leader Don Brash says Labour continues to miscalculate the impact of its ‘no interest’ student loan policy on borrowers.

“Ever since this rushed policy was released in the lead-up to the election, National has been saying it will encourage students to borrow the maximum and repay only the minimum.”

In Parliament today Dr Brash focussed on a clause in the 1992 Student Loan Scheme Act which allows students to reclaim voluntary payments up to six months after they’ve been made.

“That clause now becomes extremely relevant with Labour’s ‘no interest’ loans policy. It’s predictable human behaviour.

“Why wouldn’t people who made voluntary payments on loans that’ll no longer cost them anything in interest, claim back the cash and invest it elsewhere where it’ll earn them interest?”

According to answers in Parliament today, more than $160 million of voluntary payments were made in the past year.

“Our fears about students borrowing the maximum and repaying the minimum are no longer theoretical, they’re real. As we revealed today, there is no longer any incentive to make voluntary payments on student loans.”

In Parliament today, Dr Brash used the case of Wellington’s Thomas Banfield to illustrate his point.

“In anticipation of Labour’s looming ‘no interest’ regime, Thomas Banfield has requested and received back the $15,000 payment he made on his loan before the election.

“That money’s now been invested in an interest bearing account, allowing the former student to make a tidy little profit. No doubt other students will follow his lead.

“Labour’s student loans scheme amounts to a massive transfer of wealth from the taxpayers of New Zealand to those who’ve borrowed to invest in their education.

“Michael Cullen has now suggested he may move to close the loophole. Coming this late in the piece, this shows just how poorly planned the loans policy really is,” says Dr Brash.

ENDS

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