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Labour Opposes Student Loan Bonus Bill

Contributor:
Fuseworks Media
Fuseworks Media

By Peter Wilson of NZPA

Wellington, April 30 NZPA - The Government has brought a bill to Parliament which meets its campaign promise to give a bonus to students who make extra repayments on their loans.

Labour says it won't work and suspects there is a secret agenda to re-introduce interest on student loans.

Revenue Minister Peter Dunne introduced the bill, saying there was increasing concern about the mounting level of student debt and whether it would ever be repaid.

He said there were about 500,000 borrowers and the total value of the loans was $9.6 billion.

"Since the introduction of interest-free student loans in 2006, the number of voluntary repayments has been decreasing with borrowers tending to take longer to repay their loans in full," he said.

"Not surprisingly, this is because paying interest on a loan balance has been a big incentive to repay the loan as early as possible."

Mr Dunne said the bill brought in an incentive for faster repayment by giving a 10 percent bonus to borrowers who voluntarily made extra repayments that totalled $500 or more in a tax year.

An extra payment of $5000 would, for example, attract a bonus of $500.

Assuming the bill is passed, the bonus scheme will be effective from April 1 this year with retrospective crediting.

Labour's tertiary education spokeswoman, Maryann Street, said she thought Mr Dunne would have understood the difficulties the bill presented.

"It looks like a typical National bill that advantages those who can pay extra and disadvantages those who can't," she said.

"But on closer examination it is clearly a con. Why would anyone go for a 10 percent discount when their loan already attracts no interest?"

Ms Street said financial advisers would quickly point out it would be better to invest any extra money elsewhere.

"Why would the Government introduce such a measure when it won't work for the less well off, which is to be expected, but it also doesn't work for the better off?" she said.

"Either the Government didn't realise what it was doing, in which case they were stupid, or they knew exactly what they were doing but wanted to deflect attention away from a real agenda in tertiary education, therefore making them duplicitous."

Ms Street said the bill only made sense if interest was being charged on a loan.

"It quite frankly beggars belief that they would offer a discount for early repayment on an interest-free loan without having a secret agenda of re-introducing interest, because that is the only circumstance in which such a bonus would make sense."

Education Minister Anne Tolley said she was going to tell students and taxpayers Labour was opposing a bill that helped students pay back their loans.

"I can't believe my ears, hearing a Labour MP exhorting students not to pay off their loans," she said.

"Here we have a little bill that does an awful lot for students...and they're not backing it."

Parliament adjourned before the Student Loan Scheme (Repayment Bonus) Amendment Bill could be put to a first reading vote.

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