Student loan borrowing falls

Student loan borrowing in the past year has dropped slightly despite dire predictions from Opposition MPs the Government's interest-free loan policy would lead to a massive borrowing binge.

However, the loan scheme's annual report shows repayments have also dropped - in line with warnings from the Government's critics who said it would reduce incentives for voluntary payments.

The report, issued today, shows new borrowing in the year to June 30 totalled $971 million, slightly down on the $975 million figure in last year's report.

Of those eligible for a loan, 49 per cent took one - down from 53 per cent.

The average amount borrowed during the year, rose slightly to $6408, but the 2.4 per cent increase was lower than inflation.

The figures are at odds with claims from bank economists and National that Labour's policy would cause a gold rush on the free loans, with almost all those eligible likely to take up the offer.

However, figures in the report do back up fears the changes would discourage people from making voluntary repayments, as under the interest-free scheme they would make more from putting any extra money in the bank.

The report says repayments for the year were 3.7 per cent - or about $20 million - lower than the year before overall.

Repayments from outside the PAYE system - from the self-employed, those overseas and voluntary payments - fell from about $240 million to about $170 million.

At June 30 the average loan size was $15,883 - a 5.9 per cent increase.

The report says relatively stable fees, more part-time students and high employment contributed to the lower than expected take-up of loans.

The strong economy was a contributing factor in the trend towards more part-time students, who were more likely to have a job and borrow less.

The take-up rate for eligible full-time students rose from about 71 per cent to 76 per cent.

The average amount of time forecast for borrowers to pay off their loan remained stable at around nine years, down from a forecast figure of 10 years in 2002-2003.

- NZPA