Recent Inland Revenue figures indicate a considerable drop-off in voluntary student loan repayments among graduates during the financial year in which the Government introduced its interest-free loan policy. The figures reveal payments made by borrowers have dropped by $54.2m, from $239m for the year ending June 6 last year to $185m this year.
However, the figures also indicate that borrowers are making a bigger dent in their loans through the compulsory repayments made through PAYE tax. Education spokesman for the National party Bill English criticises the policy, claiming students are borrowing more and taking longer to repay their debt. “Of course the voluntary repayments would be down. Why would people give money up if they don’t need to?”
Mike Jaspers, a spokesperson for Minister of Education Dr. Michael Cullen, claims that the Inland Revenue data is in line with forecasts made by the government in implementing the policy. Jaspers also disputes Mr English’s claim that borrowers will take longer to repay their debt. “We expect average repayment times will fall over the next few years. The new policy means that people’s repayments go directly to the principal – they don’t have to pay interest.”
New Zealand Union of Students’ Associations co-president Conor Roberts is not surprised at the National party’s criticism of the policy, but thinks theyneed to look more to the long-term. “A National party is not going to be positive about this policy,” he says. “The important thing is the exponential decrease in time it takes people to pay off their loans. [Students] will get out of debt quicker, which means they’ll be able to buy their first house sooner.”