Proposed student loan changes in Budget

Proposed changes to student loans are being seen as the Government's way of following through on election promises.

The Government's looking at the student loan scheme as a way to shave the country's debt in the upcoming Budget with increased repayment rates and tightening of student allowance eligibility.

New Zealand Union of Students' Associations president Pete Hodkinson says it's another pressure for graduates.

"We also need to consider the implications of a generation of former students carrying debt because those who came before them, and had free education, want lower taxes."

Mr Hodkinson says the changes will put people off tertiary study.

"If people turn away from study and are not taking the opportunities to better their career options and better their future options through tertiary education, then that has productivity consequences in the long term for New Zealand."

Mr Hodkinson says the Government needs to think long term and invest in students.

Green MP Holly Walker says graduates and those trying to repay loans will just find life that bit more tougher.

"Increasing the student loan repayment threshold is like a new tax or higher tax on people who are in quite a vulnerable position when they're just starting their careers so I think it risks creating a further incentive for them to go overseas."

However Auckland University's Vice Chancellor Stuart McCutcheon thinks students should be charged interest.

"I think it's unreasonable for students from relatively well-off families who go to university to have other tax payers subsidise their loans than have those loans provided interest free."

But Mr McCutcheon says the political reality is that doing away with interest would be problematic for any government.

He says students realise that a university degree is of significant benefit to them, and can increase their life time earnings by at least 50 percent.

"I think they recognise that it's going to cost them to get that degree and they will continue to enrol in very large numbers as they have done for many years."

Mr McCutcheon thinks the New Zealand system is overly generous.

CEO of New Zealand Federation of Family Budgeting Services, Raewyn Fox, says the accessibility to a student allowance is crucial for some students.

"We're seeing families that are trying really hard to support their young people into education so they can get a decent job and student allowance is the thing that help them to do that so that would have quite a big impact on people."

She says while some people they see are already struggling to pay back their loan, that's not the case for everyone.

"We also get young people that are quite keen to get their student loans paid off fairly quickly so it doesn't impact on them getting a mortgage down the track."

Ms Fox says tightening up on student allowance eligibility will have more of an effect on people than speeding up the repayment rate.

Increased repayment rates for student loans are also expected in the Budget.

At the moment, loan holders have to pay back 10 cents of every dollar, once they earn over $19,000 a year.

Photo: NZ Herald