Labour loan scheme at the generous end of the scale

How does New Zealand's student loan system measure up against the rest of the world?

Loans are a fact of life for students in more than 60 countries.

According to a 2003 Ministry of Education discussion paper, Student Support in New Zealand, there are two main types of loan scheme: mortgage-type schemes, where borrowers pay fixed repayments for a predetermined period, and income-contingent schemes, where repayments are determined on the basis of a student's income.

National's proposed student loan policy of giving people working in New Zealand tax deductions on interest paid on student loans is used in Denmark. In Canada, there is a 17 per cent tax credit on the interest portion of the loan repayments made each year.

In the US, a variety of tax benefits are available, including for parents who are saving for their children's education, for parents and students while students are studying, and tax deductions on interest paid on student loans.

A number of countries, such as Australia, have a real rate of interest of zero on student loans, by adjusting the interest rate to the consumer price index. Labour's policy of abolishing interest for people with student loans in New Zealand takes that concept a step further.

New Zealand

Tertiary students can get a loan to help with fees, course-related costs and living costs.

The interest rate is 7 per cent.

Repayments begin once a student earns more than $16,598, with 10 per cent of income above this figure taken from wages.

No interest during study.

Australia

Loans can be used to pay all or part of the student contribution for tuition.

All loans are indexed each year to reflect changes in the CPI but are otherwise interest-free.

A progressive repayment rate is used, based on income above $36,184.

There is a 10 per cent bonus on voluntary repayments of $500 or more.

Canada

No interest while studying.

After study, interest is prime interest rate plus 2.5 per cent (floating rate) or prime interest plus 5 per cent (fixed rate).

Uses a mortgage-style scheme, typically over 9.5 years.

Some interest relief if income is below a certain level.

17 per cent tax credit on the interest portion of loan repayments made each year.

England

Interest rate set according to CPI.

Loans are written off at age 65.

On the older mortgage-style scheme (largely discontinued), loans are written off when a borrower is 50 or after 25 years.

Repayment is 9 per cent of income over $39,000.

Denmark

Interest rate 4 per cent while the student is studying then it's set at central bank minimum lending rate plus 1 per cent.

Interest accumulated on loans before graduation and interest charged on loans during repayment is tax-deductible.

Uses a mortgage-type scheme with a 15-year repayment plan.

United States

Federal scheme has a variable interest rate with a cap of 8.25 per cent. Tax benefits.

A mortgage-style scheme with several repayment plans; usual loan term is 10 years.

(Source: Ministry of Education Student Support in New Zealand)