By political editor Duncan Garner
The Prime Minister has signalled that the interest-free student loan scheme will change in this month's Budget, and there will be new tougher eligibility rules for those getting student allowances.
Labour says students should get ready for what will be a "black Budget".
Students were this afternoon only just coming to grips that Budget 2012 will target them, forcing them pay back their loans faster.
More than half a million students have interest-free student loans.
Last year they borrowed $1.6 billion off the Government, interest-free.
John Key doesn't like the policy, but he's keeping it, and tightening the rules in this month's Budget.
“Effectively they will be asked to pay it slightly quicker,” says the Prime Minister.
The changes will see students forced to pay off more of their loan once they start working and earning above a threshold.
The Government is also likely to further target Kiwi students overseas.
It will save the Government tens of millions of dollars.
“It's good news for them because they will pay off their loan faster and good news for us because our liability decreases," says Mr Key.
“This will be a black Budget for students,” says Labour deputy leader Grant Robertson.
But Business New Zealand says both National and Labour should wake up and ditch the policy because it's so expensive.
“The Prime Minister should get rid of it and Labour should support that,” says Business New Zealand chief executive Phil O’Reilly. “It's poor policy."
There will also be other changes to the $600 million a year cost of student allowances. They will only be available to those in the early years of study, and only those who need them will be eligible.
“It won't be a dramatic change but it will be a directional change,” says Economic Development Minister Steven Joyce.
The Government is also going to change how it funds early childhood education.
Right now it is 20 hours free for all three- and four-year-olds.
But those who can afford it may lose the help, and those who need more assistance will get it.
“Obviously the big area of help is Maori and Pacific kids, and obviously you can expect to see something in that area,” says Mr Key.
Mr Key also says this year's Budget will not be a slash and burn exercise. But it is the second year that it hasn't spent one new dollar, and that is now starting to bite.
Cuts and changes to some areas of education funding will be a real focus in this Budget, with the Government targeting those who need help and taking money away from those who are deemed better off.
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