Student loan costs rise

Latest figures show the cost of the Government's interest-free student loan policy has risen since the cost stated last month.

However Finance Minister Michael Cullen said the policy was affordable.

The operational costs are estimated at $32 million in 2005-06 and $218m in 2006-07, rising to $269m in 2009-10.

Dr Cullen said: "This is in line with, although a little lower, than the Labour Party's costings and significantly lower than the Treasury scenario released during the election campaign."

The figures released today were finalised on December 6. The figures were higher than those supplied to Cabinet on November 14 and referred to by Dr Cullen in Parliament on November 16 during a debate.

"The earlier estimates assumed a cost on the operating provision of around $200m a year from 2006-07. The difference between the two sets of costings reflects changes in technical assumptions and refinements to the forecasting model," the Deputy Prime Minister added.

The official costings also provided for an annual cash impact of $157m in 2005-06 and $293m in 2006-07, going up to $308m in 2009-10. This represented the cost to the Government of increased borrowings and slower repayment rates.

The volume of voluntary repayments was expected to reduce over four years to 20 per cent of current levies.

There will also be a reduction of around $1.5 billion in the value of the student loans portfolio held by the Crown.

The Government passed legislation to provide for the interest-free student loans policy last week.

- NZPA