The impact of interest free loans

Norman LaRocque from the Forum has just published some from the latest annual student loans report. Key points are:

  • Despite a fall in -funded students, the amount of money borrowed in 2006 was up 12% over 2005
  • The uptake rate for full-time students rose from 76% to 82%.  In 2000 it was 60%.
  • Voluntary repayments  have dropped from $239 million in 04/05 to $142 million in 06/07.

Also looking at the source data, I note:

  • New borrowers increased 17% in 2006, after falling for the last three years
  • The number of borrowers aged over 65% has increased 56% in the last year to 2,196 (are interest free for retired people really the best way to spend education dollars?  Would more money for early childhood education be better?)
  • The over 65s are borrowing the most per capita – $9,440 compared to an average of $6,610.
  • Total loan balance increased by $1.7 billion from June 05 to June 07, despite the interest writeoffs!!  Went from $6.67 billion to $8.40 billion – a 26% increase in two years
  • the number of loans fully repaid in a year dropped from 25,294 in 2005 to 15,059 in 2007 – a 40% drop as there is of course a negative incentive against paying the loan back early now

So the summary is that despite fewer eligible students studying, more students are borrowing more money, and repaying it slower so hence overall student is up $1.7 billion.

The most expensive bribe since Muldoon on superannuation in 1975.

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