Interest-free student loans an expensive failure - research

Frances Cook,
Publish Date
Thursday, 18 August 2016, 5:53AM
(Getty Images).

Interest-free student loans are being blasted as an expensive failure.

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That's the result of new research by the New Zealand Initiative, which has found the policy, introduced in 2005, has led to increased borrowing, and students actually taking longer to pay off their loans.

Head of Research Eric Crampton said the policy has no major benefits, and it's backfired on all the things it promised to achieve.

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"Tertiary enrolment rates are down from their peak on 2005, and student debt burdens have not decreased, if anything student borrowing has increased, and mandatory student repayment levels had to go up."

Mr Crampton said the money would be better put towards supporting high school students, such as through better career guidance.

"If you're coming from a school where there's little tradition of going on to tertiary study, you don't know what NCEA courses you need to get into university without making a mess for yourself."

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