Loans not interest-free for people overseas

One of the criticisms of the government’s determination to have graduates repay student loans a little bit faster is that it will give them another incentive to go overseas.

But Tertiary Education Minister Steven Joyce points out the flaw in that argument:

. . .  the ones that go overseas pay interest on their loans, Paul.  The moment they leave, they’re paying interest on their loans, so that’s actually yeah, it’s actually a disincentive for people to go overseas, because if you go overseas, you’re paying interest on your loans and it accumulates while you’re overseas.  If you stay in New Zealand, you can pay it off under the system.  Yes, it will cost a little bit more, but they’ll pay it off on average four to five months faster and well get the money back for loans, and meanwhile were chasing those overseas, which the previous government dismissed as a too-hard approach.  They said, Oh, if they go overseas, well catch them when they come back. . .

The loans are only interest-free while the borrower is in New Zealand. Going overseas might – and might is the operative word – enable some people to earn more than they can here, but that is less attractive when compounding interest on student loans is taken into account.

The video of the interview is here.

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