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February 25, 2008 | by  | in News |
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Politicians argue about loan scheme; students supposed to care

National Party leader John Key has backtracked on earlier opposition to the Labour Party’s interest-free student loan policy, promising to continue the scheme if successful in this year’s elections.

The announcement was made at the party’s caucus retreat last month, where Key also added that voluntary payments would be rewarded with a ten per cent bonus.

“We lost the election and we have to accept these things are in place,” Key said. “We can’t let student loan-holders play a game of ping-pong where… interest is back on or back off.”

National has previously described the interest-free loan policy as “irresponsible” and “an election year bribe” when it was first unveiled by the Labour Party ahead of the 2005 elections.

However, Key explained that his party’s initial concerns were justified because data had since shown that the number of borrowers and loans sizes had increased. To address this surge, he outlined National’s intentions to offer a ten per cent bonus on voluntary repayments over $500 for the first ten years after a borrower first started making repayments.

“This will help get that monkey off their back as quickly as possible,” Key said.

Key’s U-turn has attracted criticism from Labour, with Tertiary Education Minister Pete Hodgson describing it as “[smacking] of desperation.”

“National has [opposed] every step we’ve taken to reduce the impost of the loans scheme on students.”

Hogson added that the repayment bonus would only favour high-earners who could afford to make voluntary payments.

He questioned National’s long-term commitment to the policy. “Only returning the interest to the loans would make discounts for repayment a good proposition, so I’m sceptical about whether we’ve heard all the policy.”

At a recent NZUSA conference, Hodgson claimed that Labour’s student support had grown each year while in government. “For the last eight years, [Labour] has taken significant steps to improve the affordability of tertiary education.”

Since 1999, Labour had introduced increases in parental income thresholds, as well as increases in how much a student can earn without affecting their allowance.

Other political parties have also been attempting to attract student votes in this year’s elections, with both United Future’s Peter Dunne and Green MP Metiria Turei announcing their support for universal allowances.

Dunne suggested that a starting point “might be to increase the availability of the accommodation supplement,” while Turei described student loans as a “failed experiment” and said that students were facing more and more barriers in accessing tertiary education.

The parties’ announcements come at a time when more students are worried more about how they will pay their living costs than their exam results. According to the Westpac Tertiary Banking 2008 study, 42 per cent of students said their primary concern was related to financial issues, while only 31 per cent were concerned with academic achievement.

Natalie Davis, Westpac’s tertiary segment manager, said the financial pressures on students could be overwhelming. “The [national] student debt burden has now tipped $9.5 billion. On average, every student currently enrolled in study owes over $29,000.”

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