Student loans might be interest free while studying and for those who stay in New Zealand afterwards but they’re not gifts.
They are required to be repaid and, for those who go overseas, with interest.
Tightening up the rules around who gets a loan, how much they can claim and the requirement to repay it is long over due.
People who with overdue fines are stopped at the border if they try to leave the country. There would be an uproar if people with student loans were treated that way but when the 15% of those with loans are overseas and owe 55% of the debt they are an obvious target for tighter rules.
Suggestions by Tertiary Minister Steven Joyce are reasonable. Giving those who’ve had loans and go overseas a three year holiday before they’re required to start repayments is far too generous:
. . . we have this thing called the three-year repayment holiday right now, which the previous government started, which seems to have been a pragmatic decision that they made that they weren’t collecting it anyway, so let’s pretend that we won’t collect it. I’m concerned about that. I think it sends the wrong message that somebody can sit overseas for three years and not make any commitment at all towards repayment. Now, when you go on your OE, perhaps you go six months or a year without getting an income, but, actually, once you’re over there for about a year, you’ve got to be living on something, and we’re thinking that we might change the length of that repayment holiday. . .
. . . Everybody who goes overseas automatically gets it, and I’m thinking maybe we’ll look at something like an application requiring them to leave a contact in New Zealand, for example, and actually limiting the period of time to a lot less than three years.
Using debt collection agencies and recalling the whole loan if people ignore requests to make repayments; and allowing people over 55 to take loans for fees but not living costs is also sensible.
Interest-free student loans was an election bribe before the 2005 election. It was one of the dead rats National swallowed during the 2008 campaign.
Swallowing it doesn’t mean the government can’t tighten the rules to make it a bit easier to digest.
These changes will do that, saving money without imposing unreasonable costs on graduates.