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Wiping student loans will not cost $122 million

The Alliance said Max Bradford's claims that wiping the interest on student loans would cost $122 million next shows he has no grasp on the student loans scheme.

'Mr Bradford's figures are based on a misunderstanding of how students repay their loans. Excluding new borrowing the total sum repaid next year will be the same as this year. The difference is that students will not take as many years to pay off their debts.

'Firstly the government will not get much of the projected income from the student loans scheme.

'Next year the government is writing off $101 million, and next year is the first year in the history of the scheme where interest repayments total more than doubtful debts and writeoffs. Since 1992 $219 million in has been paid in interest whereas $427 million has been written off.

'Secondly the Alliance policy on student loans will mean that students will take less time to pay their student loans. But they will still be paying their loans at the same rate they are at present.

'Currently a student with an average loan of $11,585 on the average income of $34,400 at an interest rate of 7% would repay their loans in eight years assuming no voluntary repayments were made.

'If the interest was removed and the repayment rates remain the same, as is proposed by the Alliance, this same student would repay the loans in six years.

'During these six years this student would still be repaying the same amount each year.

'This means that there will be nothing like a decrease in government revenue in the next year of $122 million. All students will continue to pay their loans as at present. The difference is that they will not be hit with crippling interest rates and will finish repaying their loans earlier.



'For students with huge loans the effects will be more pronounced. A student with a $20,000 debt under current policy will repay their debt in 19 years, whereas a student under Alliance policy will repay debt their in 11 years.

'This policy is about dealing with the injustices of the student loans scheme. It has far reaching consequences that cannot be summed up by a cursory analysis of the figures as Max Bradford has done,' Jim Anderton said.


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