Fourth try at costing loan policy

A fourth estimate of the cost of Labour's plan to axe interest on student loans is emerging - somewhere between $200 million and $300 million.

Finance Minister Michael Cullen revealed the range of the new estimate yesterday but not the actual figure.

He had just been congratulated on Parliament's steps by student representatives over the passage on Tuesday night of legislation implementing the policy.

A key Labour Party election pledge, the policy when first announced was estimated to cost $302 million in the 2008-09 year.

Just before the election Labour was forced by the Ombudsman to reveal an earlier Treasury costing it had rejected - $390 million in 2008-09.

Then last month Dr Cullen told Parliament the cost had been re-estimated at $202 million.

Yesterday he would not specify the latest figure but said it was still below Labour's original estimate, being "over $200 million but under $300 million".

There was also a new estimate of the impact of the policy on the value of the student loan book, which would now take a hit "significantly under" the $2 billion previously cited.

The actual costs would be released in the Half Year Economic and Fiscal Update on Monday, Dr Cullen said.

National finance spokesman John Key said the Government was not to be trusted on any costings of the policy.

"What this shows is they haven't got a clue what the real numbers are."

At Parliament, student representatives gave Dr Cullen a giant gift-wrapped Christmas parcel to thank him for the policy, which comes into force on April 1. The parcel was empty, but the students pulled a Christmas cracker with him.

Dr Cullen's spokeswoman said he was not disappointed at the lack of substance to the gift, saying the box was "full of appreciation".

The legislation passed on Tuesday night also implements the expanded Working for Families scheme - another key Labour election pledge.

The legislation was supported by NZ First, United Future, the Greens, the Maori Party and the Progressive Party. National and Act voted against.

New Zealand University Students Association co-president Camilla Belich said the legislation was a "historic win".

The student movement had been working towards lasting reform of the student loan scheme for a decade, she said.

National says students would borrow as much as possible under an interest-free regime and make only the minimum repayments as there is no incentive to do more.

But Ms Belich said it was not possible under the scheme to borrow large sums and students were as debt-averse as anybody else. 


Pick a number

Treasury estimates of cost of axing interest:
* July $302m
* September $390m
* November $202m
* Now $200m to $300m
* Figures are for 2008-09