Student Loan Policy Is Increasing Cost To Taxpayer

Official report exposes student loan policy's increasing cost to taxpayer

The student loan no-interest policy is costing taxpayers more and more, the Education Forum has found in figures in the recently-released Student Loan Scheme Annual Report.

The Education Forum has found the report shows the no-interest student loan policy introduced last year has led to more student loan borrowers, more borrowing and a steep fall in loan repayments from borrowers.

According to the report:

* The number of students borrowing under the loan scheme rose by 8.4% between 2005 and 2006, while the value of loans drawn down during the year increased by nearly 12%. Both occurred despite a decline in the number of government-funded students.

* The student loan uptake rate among full-time students rose from 76% to 82%.

* The report also shows that the value of interest write-offs under the loan scheme more than doubled from $254 million in 2005/06 to $558 million in 2006/07; while borrower loan repayments (those made directly by borrowers, rather than through employer deductions) dropped sharply from $173 million 2005/06 to $142 million in 2006/07 (versus $239 million in 2004/05).

* The cumulative impact of the government's successive introduction of its no-interest student loan policy in 2000 and 2006 has been even more significant, with the student loan uptake rate for full-time students increasing from 60% in 1999 to 82% in 2006 and interest-write-offs totalling $558 million in 2006/07 up from just $20 million in 1999/00.

"None of these effects is surprising. Indeed, critics of the policy change identified them at the time the policy was announced in the heat of the 2005 election campaign," said Education Forum policy advisor Norman LaRocque.

"While the cost of student loan write-offs - in terms of increased borrowings and lower repayments - is significant, the additional spending will do nothing to improve the standard of teaching or research at New Zealand tertiary institutions, nor will it help New Zealand tertiary institutions to compete in the increasingly global market for top-class academic staff," said Mr LaRocque.

The Ministry of Education report is at: http://tinyurl.com/2sqfmx

ENDS

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