Student loan scheme losing $1 billion each year

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Sat, 05 Nov 2011 6:05p.m.

Student debt is forecast to grow to more than $14 billion in the next three years

Student debt is forecast to grow to more than $14 billion in the next three years

By Brook Sabin

A 3 News investigation into the student loan scheme has uncovered documents that show, if it was run as a business, it would be losing $1 billion each year.

Critics are outraged and want it to become an election issue.

They say the confidential treasury briefings prove why interest needs to be reinstated to the scheme, and fast.

University students are in the middle of exams at the moment and as student debt surpasses $12 billion, most continue to rack it up interest free.

ACT leader Don Brash says “if you're not bright enough to take interest free money when it's offered to you, you're not bright enough to be at university”.

But it all comes at a big cost to the taxpayer.

Documents obtained under the Official Information Act reveal Finance Minister Bill English met with officials last year to discuss student debt and then asked "the Treasury" to report back on the "full cost" of the scheme.

A month later they came up with their briefing revealing the huge loss of money per annum.

Kim Campbell of the Employers and Manufacturers Association says the student loan scheme is seriously broke, “it doesn't make any business sense at all”.

“The balance sheet is wonky and it needs addressing.”

Economists are also gobsmacked.

Jean-Pierre de Raad of NZIER puts it in context.

“We are spending a billion dollars a year or so on financing student loans but the total amount of new money for new spending on government programmes like health is about $800 million.”

ACT is the only party campaigning on interest free loans being gone by lunch time.

“There is no justification for waving interest on student loans.”

But National, which fought the policy when it was first introduced – now embraces it.

Tertiary Education Minister Steven Joyce says he believes it can be made more sustainable.

“Provided firstly, we've got to get the students who have gone overseas to pay much more off their student loans, and we've also got to take more care, as we are doing, about who we lend money to, because there are many groups we lend money to that can't pay it back.”

Student debt is forecast to grow to more than $14 billion in the next three years and these Treasury documents call for significant action to try to bring that under control.

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Comments

09 Nov 2011 11:12a.m.

Muff wrote:

guess this is just the tip of the iceberg of long term issues that comes from voting labour

07 Nov 2011 03:22p.m.

cherie wrote:

Helen Clarke did this to the country to win votes if you all remeber. It was the promise that won their last round. Now they are trying to bankrupt us with these new promises. Shouldnt be allowed. I agree with revoking the passport if they do no pay up. Those not paying are risking the whole thing for future students

06 Nov 2011 11:10p.m.

ninetynine wrote:

jessica, why aren't passports a right? in this world every human should be able to see every part of our planet its why planes and yachts were invented. they weren't invented so that corporations can take over them for the sake of making money. all i ask is that anyone who hates the movement just do some research on it at least look into the "venus project" the epicenter of the movement.

06 Nov 2011 08:28p.m.

Sean wrote:

Christopher is right about the dropping out of students, but thats mainly due to the fact they need to pay for living costs, and the loans and study link don't pay enough for those studying to stay there and complete there course, i had to leave my course for just such a reason, i really want to finish but cant find part-time work to even cover my day to day costs let alone add the costs of study as well. It does need to be monitored, yes it got out of control a few years back, but we need to keep our learning up and then support them with jobs that they can go into, i really like to Labour apprentice scheme, but there still needs to be new business development funds for those that want to create work for everyone.

06 Nov 2011 07:40p.m.

Debt-illusion wrote:

If the Govt has the power to print its own currency WHY DOES IT BORROW !

06 Nov 2011 06:33p.m.

Brent wrote:

Leave the interest free loans alone, I think there great,

06 Nov 2011 06:27p.m.

Christopher wrote:

I a big problem that needs sorting out in the loan shceme is the ammount of people who start courses and don't complete them. I did a foundation course for Nursing as I finished my high shcooling abroad and no joke, about 50% of the people must of droped out of that course.

06 Nov 2011 04:36p.m.

Katrina wrote:

I agree Grant. Most people don't even study in a field they end up working in. There are so many non specific qualifications these days. Maybe interest free loans should only be available for specific qualifictaions that lead to a specific job ie. Doctors & dentists and other medical positions. At least with types of jobs/study the person is contributing to the community with their skills before they even finish study with their on the job experience component.

06 Nov 2011 04:17p.m.

jessica wrote:

For those that go abroad and decline to pay, why not revoke their passports?. Passports are a privilege not a right after all. No passport = foreign visa becomes invalid = unable to remain in foreign country = a risk not worth running

06 Nov 2011 02:52p.m.

Thom wrote:

The student loan system is an investment in our education, makes education accessable and should remain the way it is - sure make sure people pay their loans back. But lets think of the hundreds of million dollars that the student's haven't had to pay back, its helped them invest in their future instead of having to be burdened with debt.