National to cut debt repayment time

Don Brash

National's $70 million plan to give tax rebates on student loans will significantly reduce the time it takes to pay the debt back, the party says.

The policy is centred on making the interest payments on student loans tax deductable.

Deductions would be made automatically by Inland Revenue, which would credit the money to the person's loan balance.

National says the policy would apply from April next year.

"This measure will facilitate a more rapid repayment of student loans by working New Zealanders," said leader Don Brash.

The policy is part of the party's tax policy and is aimed at wooing the 461,000 people who have student loans.

Dr Brash said the policy was also aimed at making it attractive for young people to work and live in this country.

"We must provide better incentives for our people to build their future in this country."

Dr Brash said people who borrowed to set themselves up in trade or business were able to deduct the cost of interest from their taxable income, and students who borrowed to invest in their future should be able to do the same.

The policy has not won over the NZ University Students Association. Co-president Camilla Belich said it would not help to reduce debt if student fees were increased at the same time.

"This policy also does little to help those who would really benefit from a debt write-off. Mums and dads at home taking time out of the workforce will not benefit from this policy, neither would those on low incomes.

"It is a policy essentially of tax rebates for the rich."

But the policy has been more popular with graduates now working and paying back their loans.

Nursing student Sandra Strickett said the scheme could help to keep graduates in NZ, removing the debt burden much quicker.

But Melinda Clasper, who is in the final six months of a business degree, thought otherwise.

"I don't think they should be charging interest at all. It should just be a straight repayment scheme."

Systems administrator Malcolm Burgess, who is studying automotive engineering, said he wasn't "overjoyed, but it's still better than nothing".

Education Minister Trevor Mallard labelled National's policy as "complex and pathetic" and said it would be funded by National's plans to remove caps on fees and cut tertiary funding.

Mr Mallard said the policy was unfair because it would favour those on high incomes.

"[It] will punish non-working graduates including women who may take time out from the workforce to have children. It will also punish those on lower incomes."

Labour has yet to announce its student loan policy.

WHAT THE DEDUCTION REALLY MEANS

Malcolm Burgess

This systems administrator earns $32,000 with a loan of about $15,000.

The interest on his loan works out to be $1050, but under National's scheme Mr Burgess will receive a tax deduction of $220.50 in his first year.

Jo Swete

Miss Swete is taking a breather from her studies to earn some money to go back to nursing school. The 20-year-old has a year's study under her belt, and has amassed a student loan of $10,000. As a sales consultant, she earns $31,000 a year. The interest on her $10,000 loan at 7 per cent per annum works out to be $700. Under National's scheme, she will receive a tax deduction of $147 in her first year.

Jo Swete says the scheme has merit. "It sounds quite good. They're taking it off [in interest] but reinvesting back into the loan.

"You're able to see the figure go down."

Sandra Strickett

Ms Strickett has about a year left to go in her nursing studies.

By the end of her studies next year, she estimates that her loan will stand at about $16,000. But she'll also be earning about $40,000.

The interest on her loan works out to be $1120, but under the scheme she'll also receive a tax deduction on her interest worth $369.60 which will be returned to service her loan, reducing the principal she will have to pay back.