Cure too late for loan guinea pigs

Two months ago Paul Wiggins was elated - after eight years he had finally paid off his student loan.

But last week that happiness was replaced with annoyance when Labour announced it would abolish interest on student loans.

It was not that the 29-year-old Auckland marketing manager thought there was anything wrong with the policy - in fact he was pleased to see political parties finally address the issue - it was just eight years and $15,000 worth of interest payments too late for him.

Mr Wiggins, who borrowed $15,000 between 1994 and 1998, is part of the guinea pig years, or as he calls it Generation Experiment - the group of students who took out loans in the 1990s.

During this period - from 1992 when the loans were introduced to 2000 when interest while studying was abolished - about 250,000 people took out student loans worth a total of almost $3 billion.

It was a time when students were charged interest while they were studying, when 18-year-olds could draw down lump sums of thousands of dollars and student allowances were harder to get.

No one was sure what the future of the system was, and there was that prevailing rumour that the Government would "come to its senses" and write the loans off.

"When I signed up for a loan, everyone thought it was great, and the rumour was it was going to be canned in a couple of years," Mr Wiggins said. "It was not exactly sound financial advice we were receiving."

Mr Wiggins admits he spent his loan unwisely in his first year at Waikato University.

"I drew down my $1000 for my books and ignored that and essentially just went to the pub. I had never seen money like that before and at that stage it was just a big joke, but it certainly did get more real when we started paying interest and our loans were growing at a rapid rate."

Rachel Piggin was another student loan guinea pig.

The 32-year-old director of marketing at Waiariki Institute of Technology was part of the first year of students who took out loans in 1992.

During her physical education degree at Otago and a subsequent post-graduate tourism diploma, Ms Piggin clocked up a loan of $25,000.

After nine years of working, Ms Piggin said, she will finally pay her loan off in a couple of months. She has paid $25,000 in interest.

When she heard Labour's policy to stop interest she was "gutted".

"By the time this policy is implemented my loan will be gone. That's $25,000 worth of interest - what I could have done with that."

Auckland sales rep Mitchell Hall, who has a $33,000 loan after completing an arts degree at Auckland University between 1993 and 1997, said the student loan issues will influence the way he votes.

Mr Hall said he feels ripped off after paying years of interest, but as he still has an outstanding loan balance he is keen to see Labour's policy implemented.

"It seems a lot fairer, and for me I think it is great. Especially the way they are doing it for people who stay in New Zealand, I think, is much more forward looking."

But Mr Wiggins describes Labour's policy as knee-jerk and says it appears to have been poorly thought through. "The National policy I think has more reason behind it, because it is looking at shifting a debt burden from people who are working and pulling in wages, and I think it will have a more direct effect on the economy because essentially there will be more money around."

He added, "This sort thing should not be the preserve of political promises because it does become a vote getter rather than a serious look at the issue."

For Ms Piggin, paying back her student loan has meant plenty of financial sacrifice, but she also said the qualifications her loan enabled her to get have improved her life.

"If I hadn't done what I did I wouldn't be in the job I'm in now, earning what I earn now."