How to avoid paying back a student loan

Some elderly people are obtaining student loans with no intention of paying back the money before they die.

A total of $4.4 million in student loans was written off in 2004 because those that had received the money had died - double the $2.2 million figure in 2003.

With no age restriction on student loans, there are now suggestions some of the country's 4046 people aged 60 or over receiving a student loan are obtaining them without any intention of repaying.

Under current laws, the Government does not claim the cost of the loan back from the deceased's estate. Said Retirement Planning Seminars NZ Ltd manager Peter Fleming: "It's a rort and it needs to be stopped. The Government may have lost $4 million last year, just watch how fast that figure grows to $40 million in future."

He claimed some elderly people were justifying their actions with the false logic that they had "paid tax all my life, and are finally getting something back".

Ministry of Education tertiary sector performance analysis manager Roger Smyth said the issue was not whether the system was being taken advantage of, but whether New Zealand stopped older people from having the same access to tertiary services as other students.

"Government has not imposed an age limit on borrowing because we are committed to complying with human rights legislation and that would be age discrimination," he said.

Just like other students, senior citizens apply to Studylink under the Ministry of Social Development to access loan facilities for fees, living costs and course-related costs.

Most older students are part-time and eligible only for fees and course-related costs, but all fulltime students can also get living costs.

This debt is transferred to Inland Revenue at the end of the year and if students are above the income threshold of $16,172 they start repaying the debt plus interest. If they are below it, they do not. Borrowers are only required to pay 10 per cent of income earned above this threshold.

Mr Smyth said there would always be a small minority who may seek to abuse the system.

But the $4.4 million written off last year should be put in context with the $6 billion total amount of student debt owing.

Claims of some elderly people abusing the loan system did not surprise the Poverty Action Coalition which said the superannuation benefit was too small.

"Good on them," said spokesman Garry Otter. "We know of many older folk just keeping their heads above water financially."

- HERALD ON SUNDAY