Come Clean On Student Loans Helen

"Labour must come clean on what it plans to do with student loans."

"Helen Clark yesterday promised a freeze on interest payments for student loans while students were studying," Minister for Tertiary Education Max Bradford says.

"Ms Clark is continuing to make ambiguous statements about her proposals for the loan scheme. The lack of detail shows she either can't work out how she is going to afford her promises, or she knows it will mean increased taxes, neither which she'll admit to.

"There are over 40,000 students who currently don't use their student loan. If their loan was interest free they would surely borrow, if only to pocket the interest. If they each borrowed $6,000 the taxpayer would have to find another $240 million.

"This is as much as we are investing in the new Auckland hospital," Mr Bradford said.

"Labour would give money that could be spent on health to entrepreneurial students so they could invest it in the stock market.
"This issue was looked at extensively when the loan scheme was reviewed last year. As a result of the review a number of changes were made to help students pay less interest and pay their loan back quicker.
"For example; from 2001, students will have up to 25% of their base interest written-off while studying. The base interest is a significant part of the interest rate. Currently the rate is 7%, the base rate is 5.3% and the inflation adjustment is 1.7%.

"As well as this, the Government will write-off a substantial part of interest payments once a borrower is earning. If the base interest payment rises beyond 50% of each compulsory repayment, the Government will pay the balance.

"This will see people with large loans relative to their income pay them off much quicker.

"For example, someone with a debt of $20,000 and an income of $30,000 will pay their loan off about three times faster under the new policy: under the old policy they would repay $128 from their balance after a year earning. Under the new policy, the loan would decrease by $424 and the government would write off $296 of interest.

"The National Government is helping those who need it, the Labour Government is proposing to help those who don't need it," Mr Bradford.