Total Student Debt To Be Cut By Close To A Quarter Total student debt will be cut by almost a quarter by 2024 in the wake of impEducation
Total student debt will be cut by almost a quarter by 2024 in the wake of improvements to the Student Loan Scheme announced today.
Education Minister Wyatt Creech has released details of changes to the Student Loan Scheme.
"There has been too much evidence of abuse for us to leave the scheme as is. We are restricting the amounts of money students can borrow at any point in time, while also making it easier for people to make in-roads into paying off their debt.
"The changes are designed to make the scheme fairer, reduce the debt burden on students, reduce the time they spend repaying loans and reduce abuse of the scheme.
"The Government has listened very carefully to parental and student concern about how the Student Loan Scheme works in practice.
"The improvements will see loans used to help fund the costs of a student's education, and nothing else," Mr Creech said. "They should put an end to young people getting ready access to large sums of money through their loans to pay for things like overseas trips and motorbikes.
"One of the key changes will see 50% of all compulsory student loan repayments (minus the inflation adjustment) going to paying off the principal. This means students who have low incomes relative to their debt will no longer make repayments without making inroads into their principal," said Mr Creech.
"It will reduce student debt by $4.238 billion by the year 2024, a 22.5% decrease in the forecast level of debt. This change will come into force from the 2001/2002 tax year." c Changes to Student Loan Scheme:
Adjustments to loan scheme eligibility and entitlement criteria from 1999
An end to paying out student loans in lump sums
Fortnightly direct-crediting of the living costs entitlement into students' bank accounts
Students will no longer be able to draw down loan money via the 0800 freephone line.
This will become solely a customer service line
Parental consent will be required before students under 18 can get a student loan
Students fee entitlements must in future be direct-credited to their tertiary education providers (this issue was raised by the Prime Minister's Youth Forum last month)
The amount students can borrow for course costs will be a maximum of $500. The amount to be borrowed will depend on evidence of actual costs
Student union fees will no longer be covered through the loan scheme
The minimum amount acceptable as a repayment in the year of borrowing will be reduced from $200 to $100
Adjustments to the repayment regime from 2001/2002 tax year
Ensuring that at least 50% of repayments, less inflation interest, goes to the repayment of principal by increasing the existing base interest write-off provisions
High income earners will be required to repay their loans at the rate of 15 cents in each dollar of income earned over $50,000.
This review has not dealt with the interest rate issue. (The interest rate falls under the portfolio responsibility of the Revenue Minister).
"I can confirm that further work is being done on the student loan interest rate including the methodology by which it is determined. Currently the student loan interest rate is connected to the wholesale 10 year bond rate and is set once a year.
"The Student Loan Scheme is there to provide funding for those who want to enter tertiary study. It is designed to ensure no-one is deterred from tertiary study because they don't have the cash at the time.
"The improvements announced today will ensure the Student Loan Scheme is used to fund education, not to fund high living, holidays and partying," Mr Creech concluded.