Labour’s “interest free” student loan policy is not all that it seems says Belinda Vernon MP for Maungakiekie.
“Labour has chosen its words carefully when describing its fairer repayment system,” says Ms Vernon. “It pays to read
the fine print.”
“Labour says that ‘no interest’ will be charged on loans to full-time and other low-income students while they are
studying.
“But when talking about how much interest will be charged once a student stops studying the words vary subtly but
importantly.
“Labour says that for those earning between $14,716 and $25,000 no “base interest” will be charged. And for those
earning between $25,000 and $30,000 “base interest” will be progressively applied.
“The difference between “interest” and “base interest” will be lost on most people. But when it comes to student loans
the difference is important.
“As students know the interest rate charged on a student loan is made up of two parts: the base interest rate and the
interest adjustment rate.
“The interest adjustment rate reflects the movement in the Consumer Price Index (CPI) of the preceding year. It is
effectively an inflation adjustment.
“Clearly Labour intends to charge the interest adjustment rate or inflation component as soon as students leave the
tertiary institution. But it isn’t prepared to say so!”
“Students should not be taken in by thinking that interest will only accrue once they earn over $25,000. This is clearly
not the case. An inflation adjustment component will kick in as soon as they stop studying.”
“Labour’s policy is not what it seems,” concluded Ms Vernon. “Students, beware of Labour bearing gifts.”
Ends