Most student loan borrowers owe less than $9,000

Half of all student loan borrowers have a loan balance of less than $9,069, new figures show.

The annual report of the student loan scheme was presented to Parliament this afternoon. It provides an overview of current government policy for student financial support, and it reports the financial position of the Student Loan Scheme for the period ending 30 June 2002. It also provides general information about borrowers’ use of the scheme and combines information from StudyLink (a service of the Ministry of Social Development), the Ministry of Education and Inland Revenue.

Associate Education (Tertiary Education) Minister Steve Maharey said while the average student loan balance at 30 June 2002 was 12,643, nearly two thirds (64%) of all borrowers actually owed less and half of all borrowers have a loan of less than $9,069.

“The rate of increase in the average loan balance has significantly reduced over the last two years. Factors contributing to this trend include fees stabilisation and the introduction of no-interest-while-studying in 2000.

“Less than 5% of all student loans currently held by Inland Revenue are for more than $40,000. The government believes it is important that future changes to the loans scheme focus on those graduates experiencing high levels of indebtedness.

“We cannot afford to train highly specialised graduates only to see them leave New Zealand to escape big student loans. We are currently reviewing student support and intend reforming the student loan and allowances schemes to make them fairer and sustainable into the long term.

“The level of student indebtedness has generated considerable public concern in the past. The new figures showing most students owe less than $10,000 will be viewed by most people as a reasonable investment in the skills a young person needs to carry them through their lives. Loans of this size are generally paid off within ten years of graduation,” Steve Maharey said.

Among other findings in the Student Loan Scheme Annual Report: total outstanding student debt at 30 June 2002 was $4.75b; 17,085 loans were fully repaid last year (increasing to to 23% the total number of loans fully repaid since the Student Loan Scheme began in 1992); and while the full interest rate for 2002/03 is 7.0%, not many students face the full interest rate because many are eligible for an interest write-off or interest reduction. The effective interest rate for 2002/03 is estimated to be 2.7%.

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