National offers students interest cut

WELLINGTON - National has tried to dampen criticism of the student loans scheme by bringing forward a reduction in interest rates for students who are still studying, but has stopped well short of Labour's no-interest promise.

Under the changes - which students and opposition parties condemned as an election stunt - most students will from next year pay 5.7 per cent interest on their loans compared with 7 per cent now.

Other changes will mean students face shorter repayment periods.

Ministers said a nurse who borrowed the maximum $31,500 during study and started earning $31,000 would pay his or her loan off in just under 20 years, compared with 25 under the old policy.

Tertiary Education Minister Max Bradford conceded that the loan would be repaid in just over 18 years under Labour's policy, and that other students would also face shorter repayment periods under Labour's scheme.

Students and opposition parties damned the changes - which National had planned to introduce in 2001, but decided late in August to bring forward to next year - as too little, too late.

New Zealand University Students Association co-president Karen Skinner said: "The Government has had seven years to make changes to the student loan scheme and it has chosen not to. What Max Bradford announced today is nothing more than a pathetic pre-election bribe."

Labour leader Helen Clark said the Government was on the back foot on student debt and would have been better off not pretending to respond to the concerns of students and their families.

"On Mr Bradford's own calculations, his tinkering today would leave a student who has borrowed the average amount over four years scarcely $400 better off overall," she said.

"If this is a bribe, it is a pathetically small one."

Mr Bradford and Education Minister Nick Smith said the changes would allow students to pay back their loans earlier and save tens of thousands of dollars.

They said that from next year:

* Students would get up to 25 per cent of their base interest written off while studying. That meant most students would pay 5.7 per cent on their loans rather than the present 7 per cent.

* At least 50 per cent of repayments, less the inflation adjustment, would go first towards repaying loan principal.

* Graduates on high incomes would repay their debts at an increased rate, with borrowers repaying their debt at 15c for every dollar earned over $50,000. Those with student debts must repay 10c for every dollar earned over $14,716.

The ministers also said that from January 1 students would be able to borrow $1000 for course costs rather than the present $500, reversing an earlier decision to cut the amount.

Mr Bradford said the changes would significantly benefit students but would also "keep a cap on the incentives for students to borrow too much."

- NZPA