John Key said while the economics of interest-free student loans may not be great, the politics is even worse if you add interest back on.

ACT leader David Seymour has argued the Government lacks courage for ruling out putting interest back on.

The Prime Minister told Larry Williams that would double the repayment time for the average person's loan, as the Government pays about 70 - 80 percent of their university costs.

"We've got interest free loans now whether you like it or not, they're well and truly entrenched in the system."

"If you tried to change them and put interest back on I suspect another party would campaign and take them back off again."

John Key said there's not too much cause for concern as while there's benefit for those who get interest-free loans, they're likely to be higher-income earners over time, and pay more tax in due course.