21 July 2005 Media Statement
How National's student loan policy benefits high income earners…
JOHN
John has a $30 000 loan, and earns $45,000 a year.
He makes a compulsory yearly repayment of $2,841, of which $2,100 initially goes towards interest charged on his loan
balance.
John will receive a tax deduction of $693, which is based on a rebate of that $2,100 at his top marginal tax rate of
33%. This will now be used to pay off more of his loan.
DON
Don also has a $30 000 loan, but Ron earns $70,000 a year.
He makes a compulsory yearly repayment of $5,341, but, like John, $2,100 initially goes towards interest charged on his
loan balance.
Don will receive a tax deduction of $819, which is based on a rebate of that $2,100 at his top marginal tax rate of 39%.
This will now be used to pay off more of his loan.
RON
Ron also has a $30 000 loan, but Ron earns only $35,000 a year.
He makes a compulsory yearly repayment of $1,841, but he faces a reduced interest charge of $1,551 due to interest
write-offs of $549.
Ron will receive a tax deduction of $326, which is based on a rebate of that $1,551 at his top marginal tax rate of 21%.
This will now be used to pay off more of his loan.
SUE
Sue also has a $30,000 loan but earns nothing because she is at home looking after her two year old son.
She makes no repayments but her loan goes up by $840 per year because of inflation adjustments.
Sue will not receive a tax deduction.
ENDS