Loan interest scrapped for students who stay in NZ
Rt Hon Helen Clark
Prime Minister of New Zealand
Minister of Education
KEY ELECTION PLEDGES No. 2:
Interest scrapped on student loans for students who stay in NZ
Prime Minister Helen Clark and Education Minister Trevor Mallard today announced the second of Labour’s key election pledges: no further interest will be charged for those with student loans who reside in New Zealand.
Helen Clark said that this was a further important step in Labour’s policy to make tertiary education more affordable.
"In our first term in government, we stopped interest from accruing while students were in full-time study. Now Labour will scrap all future interest charges on student loans for New Zealand-based graduates from 1 April 2006.
"Under Labour, from 1 April next year, no interest will accrue on student loans. And from that point, students who borrow will only pay back what they have borrowed.
"Many students have found that their efforts to reduce their debt have been limited because of the need to service interest payments. The scrapping of interest from now on will reduce total debt and knock years off repayment times."
Helen Clark said that a graduate with a debt of $15,000 who earned $35,000, factoring in a three per cent increase in salary per year, would save $6,935 and pay their loan back in seven years. This means that the time required to pay back student loans will have more than halved under Labour.
Helen Clark said that as part of the policy those graduates who choose to work overseas will be charged interest at the current rate.
"Some graduates will leave, for work and travel as young New Zealanders always have, but this policy will encourage them to return home more quickly. Those who go overseas for full-time study at postgraduate level, will not be charged interest as long as they’re studying," Helen Clark said.
"There will also be an amnesty period in 2006 where those who return from overseas or enter into a repayment arrangement will not be charged the penalty interest for any overdue payments.
"This policy is intended to encourage graduates to stay in New Zealand and contribute to our economy and society. We recognise that for some people student loan debt may have influenced their choices about where to live and work. Graduates in New Zealand will be better off as a result of this policy.
"The total cost of this policy is expected to begin at around $100 million in its first year, rising to around $300 million per annum."
Helen Clark and Trevor Mallard made the announcement at the launch of Labour’s student support policy.
Trevor Mallard said the policy also commits Labour to:
- Maintain a simplified, capped tuition fee structure to provide certainty as to fee levels to students throughout the duration of their studies.
- Conduct a specific review of the funding arrangements for medical and dental students.
- Progressively increase parental income thresholds so that at least half of all fulltime students will receive a student allowance.
- Continue to increase parental income thresholds each year by the rate of inflation.
- Increase the personal income abatement rate for student allowances each year by the rate of inflation.
- Increase the number of bonded scholarships which assist students with the costs of fees.
“Labour is committed to keeping the cost of fees down, and to making more students eligible for allowances. Tertiary education is a vital investment in our future as a country, and Labour recognises that we must do more to support students while they undertake their studies,” Trevor Mallard said.
“This policy is straightforward and ensures that all graduates will benefit in the same way, regardless of how much they earn. Labour has delivered much for students in the last six years, and with this policy we are taking another step towards more affordable tertiary education,” Trevor Mallard said.
Students and graduates can work out how much they will save and how their repayment times will reduce by using the calculator on the Labour website. (www.labour.org.nz)