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August 2, 2010 | by  | in News |
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Student Loan Scheme gets Interest-ing

News

John Key at Vic, Salient’s invitation lost. Again.

Prime Minister John Key says student debt is a “disaster”, and has raised fresh debate surrounding the future of the current interest-free student loan model.

Key commented on the loan system during a question and answer session after a speech to students at Victoria University’s Weir House last week, explaining how he saw the dire state of collective student debt.

“If you’re an investment banker—not that I am these days—you’d say it’s a disaster of a loan book… It’s $11 billion, roughly, at the moment and we collect 53 cents in the dollar, that’s it. Fifty-three cents in the dollar. If you just sat there, logically, you’d say there has to be a better way of doing it.”

While Weir House residents may not have understood the significance of Key’s comments, they were quickly latched onto by the media and student politicians. Audience members said the comments were off-hand.

Throw-away or not, the comments are the latest in a string of what could be interpreted as hints. National backed the interest-free loan scheme in the 2008 election, but Tertiary Education Minister Steven Joyce has since admitted it was a “political call” and Key, then in opposition, described the policy as irresponsible.

However, the sudden political talk surrounding student loans is unlikely to have any short-term consequences for students. In parliamentary question time the next day, Key, when bluntly asked if it was the National Government’s intention to introduce interest on loans, answered: “It is my intention to keep interest-free student loans.”

He did, however, signal that greater efforts would be made to chase up non-paying overseas debtors, saying the “Minister for Tertiary Education is looking at ways to improve collection of loans from overseas-based borrowers”. Late repayments by overseas debtors grew 111 per cent last year, the Dominion Post reported.

Student representatives spoke out strongly against any attempt to introduce interest on loans. Otago University Students’ Association President Harriet Geoghegan said she was concerned about the potential for greater numbers of students to leave New Zealand after graduation because the incentive to stay and pay back a loan without interest would be gone.

“The interest-free system, while not addressing the issues of affordability of education, is making staying in New Zealand a more attractive prospect for graduates. Key feels the government cannot afford to maintain interest-free loans, but New Zealand knows we can’t afford not to.

“Like Key, students agree the student loan system doesn’t stack up. Why would New Zealand want to produce generation after generation of graduates who are mired in a debt that is currently close to $11 billion?” said Geoghegan.

NZUSA co-President David Do said “The government should focus on reducing the need for such debt in the first place, and to let the budget’s changes regarding student loans pan out. While John Key has yet again reaffirmed the policy will stay, constant questioning of it is unhelpful and indicates National’s commitment to it is faltering.”

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