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Loan repayment threshold still far too low

12 December 2006

Loan repayment threshold still far too low

The announcement yesterday that the student loan repayment threshold will be raised is being welcomed by Green Party Tertiary Education Spokesperson Metiria Turei, but she says it is not enough.

From 1 April next year, the income level at which borrowers will have to start repaying their loans will increase from $17,160 to $17,784 per annum.

"It is good to see upward movement in the threshold, but this miniscule change is not nearly enough," Mrs Turei says.

"$17,784 is an extremely low annual income, and for most people, meeting basic living costs such as rent, food, phone and power on this income would be a challenge. If the argument behind student loans is that borrowers will be able to repay them when their education enables them to earn higher salaries, we should respect this by not be forcing borrowers to pay back 10 percent of their loan while they are still struggling to make ends meet.

"Compared to other countries with similar loan schemes, New Zealand has one of the lowest and harshest repayment thresholds anywhere. In Australia, the threshold in New Zealand dollars is $37,335.

"While it is positive to see the threshold go up, such a small adjustment means little when tertiary institutions are putting their fees up annually, some as much as 10 percent as we have just seen at
Massey University.

"It also undermines the benefits to be gained from the Government's interest-free student loan scheme.

"The small increase announced yesterday needs to be followed up with a larger, more meaningful one immediately. This should be accompanied by the creation of income bands so that those on higher incomes make higher repayments but those on lower incomes are not forced to pay 10 percent of their loan while still struggling to meet the cost of living.

"The Green Party policy of writing off a year's worth of debt for each year a graduate stays in New Zealand and contributes to the country through paid or voluntary work would also encourage graduates to remain here rather than provide them with an incentive to go overseas as the low threshold does," Mrs Turei says.


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