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Banks Don't Consider Student Loans A Major Factor

Hon Max Bradford
Minister for Tertiary Education

MEDIA RELEASE
23 November 1999

Banks Don't Consider Student Loans A Major Factor In Refusing Finance

A survey by two students' associations shows that banks don't consider student loans to be a major factor in refusing finance, Minister for Tertiary Education Max Bradford said today.

Mr Bradford was commenting on a survey carried out by the Otago University Students' Association and the New Zealand University Students' Association on the effects of student loans on people's ability to raise finance from banks and credit unions.

"The survey, which had a low response rate, concluded that student loans affected only "a small number of people" who sought finance.

"Respondents made it clear that where finance was refused, the repayment of the student loan was only one of the factors in the decision," Mr Bradford said.

Mr Bradford said it was natural that the size of compulsory student loan repayments would affect a person's ability to seek finance.

"The ability to service debt dictates the amount people are able to borrow, which is of course affected by existing repayment commitments, whether they are for credit card debts, private debts or student loans.

Mr Bradford said that since 1995, there had been only two formal complaints to the Banking Ombudsman from loan holders who were refused finance by banks.

"I would expect a bank to look favourably on student loans compared to other loans, as they are less risky, the interest rate is about half of unsecured loans, and the Government gives generous interest write-offs if the loan holder's repayments do not cover the base interest charged.

"Under Labour's no-interest-while-studying loan policy, students will make the most of the free money on offer. This will result in a dramatic increase in total student debt," he said.

Media Inquiries: Jeremy Kirk, press secretary, (04) 471-9836 or (025) 424 565



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