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