Faster student loan repayments

February 7th, 2009 at 10:43 am by David Farrar

Treasury has suggested that the Government should use the tax cuts to increase the minimum repayment rate on , correctly noting that there are little incentives o pay back loans faster at 0% interest.

At present, everyone earning more than $18,000 a year must contribute 10 per cent of their earnings to repaying their loan.

officials recommend new thresholds be set at 12 per cent for people earning more than $40,000 a year and 15 per cent for those on more than $60,000.

Planned income-tax cuts would offset the effect of the increases, the Treasury said.

Sounds sensible to me. It will lead to less student debt, and faster repayment times – both something student associations have complained about.

It recommends an overhaul of the repayment scheme and measures that “could include requiring students to pass a certain number of their courses or limiting the number of years students can borrow for”.

Also sensible. Good bye to life time students.

New Zealand Union of Students’ Associations co-president Sophia Blair called the Treasury suggestions ” ludicrous”.

“This would take much-needed money directly out of the pockets of struggling families,” she said.

This is ironic. I don’t recall campaigning for tax cuts to help struggling families who earn above the average wage.

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22 Responses to “Faster student loan repayments”

  1. MikeE (555 comments) says:

    Sophia Blair was a moron when I was at Uni… looks like nothing has changed.

    Besides… this affects *working* Graduates, rather than students, something that the NZUSA president has likely never experienced.

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  2. Hagues (703 comments) says:

    “This would take much-needed money directly out of the pockets of struggling families,” she said….

    Doesn’t the money that funds interest free loans and pays for student allowances come directly out of the pockets of struggling families? And isn’t NZUSA campaigning for universal student allowances which would take even more money directly out of the pockets of struggling families?

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  3. bringbackthebiff (99 comments) says:

    Here here Hagues
    I got no interest breaks, zip and I have paid mine off. Why are students who don’t even get interest charged while they study such whingers. I got taxed the second i drew down.

    On the other side of the coin, my partner who is a teacher watched her loan grow in size as the min repayment was less than the interest. Perhaps the interest accrued needs to be inline with the ability to repay, as well as other reforms.

    A starting teachers wage is not astronomical. For deciding to take on such an important career, she was financially penalised, go figure.

    BBTB

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  4. robbyp (5 comments) says:

    I think it is a great idea, and I am surprised the treasury has come out with such a good idea for once.. My brothers wife has a student loan, and she earns over $60k, yet she just pays off the minimum, and sqanders a lot of the rest of knic knacks.

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  5. peterwn (3,274 comments) says:

    Should there be an age limit for student loans eg 50 years old? Short vocational type courses could be exempted. Should older people be getting student loans for ‘third age’ type study?

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  6. stuarts-burgers (96 comments) says:

    I think that it is a good idea that needs to looked at.
    May be we introduce it in two steps

    A/ New Student loans started after 1 Jan 2010 work on the 10 12 15 and maybe even 20 % system in association with the discounts for lump sum payments

    B/ For existing loan holders make it voluntary to move to the 12 15 and 20 marks as of the 1st of Jan 2010 with lump sum discounts at the end of each year on the extra paid. As of the 1st of Jan 2015 move all loan holder to the 10 12 15 20 marks with lump sum payments still attracting the discount

    All thresholds to be indexed to the average wage increase for the calendar year with the loan repayment adjustments on the 1st of April each year.

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  7. Viking2 (11,484 comments) says:

    Loans should be repaid and those that don’t bother should be taken to task. Automatic is better then there is no wimping out.
    What about this idea though.
    In a normal business any expense incurred in earning an income is an expense so therefore is deductable beofre tax.
    If I pay for an employee to go to training then that is a part of my expenses.
    So, why don’t we change the game a bit and make Uni expenses tax deductible of any income earned over the same number of years that the recipient of the loan was in training. Interest can be paid as per normal on the outstanding balance.
    Now ,I reckon that would be a win for everyone including the taxpayer. No income, no deduction, interest still accrues.
    Income, expenses can be written down against income lowering the interest payable and rewarding the income payer for the effort of the training and earning income.

    Still a little socialism there but not out of control like it is currently.

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  8. LUCY (359 comments) says:

    In my opinion a very sensible suggestion from Treasury.

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  9. Bullitt (140 comments) says:

    Seems like a sensible idea. I paid my student loan off awhile ago at the minimum repayment, had it not been interest free I would have paid it off years before that. Interest free was the most stupid election bribe however I fear its not politically almost impossible to put it back on.

    Having different rates for different incomes seems like a good idea too, the 10% threshold could make quite an impact to someone earning 30k but at 100k its pretty trivial. Afterall its not a tax its paying back money that is owing.

    I would flat out ignore anything any student association says, I didnt listen to them when I was a student and they havnt got any more sensible now.

    My theory is I think all students should receive a student allowance however it should be paid for by drastically reducing the government funding of university fees and increasing student fees so the net cost to the government is nil. This would have lots of advantages
    a) Removes the idea of having to borrow to live
    b) Makes it more transparent exactly how much a university degree will cost
    c) Provides greater incentive for students to try, failing a $500 paper dont matter but a $5,000 one people would try harder

    With the exception of some medical courses or people with other circumstances such as solo parents theres no reason why any student should leave university with an unmanageble student loan. I managed to complete an honours degree while working 25-30 hours a week during semmester and much more during the holidays. The reason students have such high loans is because of the living cost component, if you can earn enough to live on (which is easily possible) and not get that part youll slash the total cost dramatically.

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  10. dime (9,977 comments) says:

    how bout get fucked!

    i just paid a 2k payment on a bonus.. some prick would rather i paid 3k??? jesus

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  11. Christopher (425 comments) says:

    I have a pretty big student loan. With NZ’s current tax situation, low wages and enormous welfare state, I will have to move overseas to pay it off. IF I like it enough overseas that I never end up coming back, I’ll probably never end up paying it off.

    Thus we have established a direct correlation between student debt and liberal economic principles.

    The message, therefore, is this: Lower/remove income tax, drop unnecessary benefits, drastically shrink the size of the Government and you will solve the problem of student debt.

    Oh, and get rid of student unions.

    Easy.

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  12. big bruv (13,923 comments) says:

    Dime

    “This prick” would rather you pay back 3k instead of 2k thank you very much.

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  13. Rocco (8 comments) says:

    Another ill-conceived plan inconsistent with wider economic objectives.

    What rocket scientist thinks cutting disposable income for people earning over $60K is a good idea right now? National’s tax package was so skewed towards people not already receiving income redistribution that a good percentage of those on top rate will receive less in tax concessions than the rise in ACC employee levies and the proposed increase of the minimum repayment rate will cost them.

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  14. dime (9,977 comments) says:

    bruv – ive paid a tonne of interest over the years.. and to be honest – id much rather be paying interest now! just give me a dirty big tax cut :) :)

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  15. pareto (22 comments) says:

    nzusa is a circus misfit show. Sophia lost to no confidence in three rounds of voting the first time nzusa had to choose a new co leader, and she was the only one that stood for it, finally she was voted in due to the fact no one else stepped up. Sad case of another activist group filled people whom are only there for political self interest

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  16. dog_eat_dog (781 comments) says:

    If the government accepts the 10/20/30 tax bracket proposal, I’d be happy with a 20% repayment threshold.

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  17. getstaffed (9,186 comments) says:

    Christopher – please stay. We need more of you sort mate.

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  18. oxymoron (32 comments) says:

    > It recommends an overhaul of the repayment scheme and measures
    > that “could include requiring students to pass a certain number of
    > their courses or limiting the number of years students can borrow for”.

    I thought this was done already, I believe there is a limit of so many weeks. Every time I’ve applied for the student allowance I have been asked if I have passed more than half of the papers I enrolled in the previous year. There are some exemptions, generally for courses that are longer. Does Treasury really mean “lets cut down on the exemptions granted”?

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  19. Tauhei Notts (1,721 comments) says:

    Some of you may have missed the singularly most important part of Bullitt’s 1.49 p.m. post.
    MAKING STUDENT LOANS INTEREST FREE was the most stupid election bribe in the past fifty years.
    It was worse than Piggy’s superann at age 60. It was disgraceful.

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  20. Glutaemus Maximus (2,207 comments) says:

    Interest free is non-sensical.

    Student Loans are what we have now. Back in the day in Blighty, when only about 7% did Tertiary Education did we have Full Student Grants.

    Effectively means tested, so sponsorships and bursaries were de riguer because most candidates in the late seventies were from higher income families.

    Industry or the Military or Institutions funded most of the courses, and subsistence.

    In this New Age, Student Loans should be linked to the OCR. Companies cannot really afford to fund education, as they are getting hammered at the other end with Pension Fund Obligations.

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  21. Esprit (12 comments) says:

    I paid back my student loan back when it was 7% interest. 8 months after I paid it back, Auntie Helen made it interest free…. thanks Helen!

    To be honest, it was only the interest that made me dig in and pay it back as fast as I could ($27k in under 2 years)… was saving up for a car project at the time (time to treat myself to something nice after 8 years of study and sacrifice!) until one day i opened my SLoan statement…. I saw how much money was disappearing in interest so resolved to pay it back ASAP…. I put my nose to the grindstone and did it.

    If I was in the same situation now, I’d be paying it off at the minimum amount…. kind of like the boyracer scum do with their fines!

    Ironically, it’s said that reducing debt as much as possible is ALWAYS the best thing to do financially…. as it turns out, in my case that’s been the worst financial mistake I’ve made in my life thus far….. I repeat THANKS HELEN!

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  22. sethpecekajus (5 comments) says:

    a bit late now i know, But what need to be done is get rid of that means testing crap my student loan grew by 3100 beacuse my parents were deemed rich, fucking fascist wankers, its now been over 4 and a half years since i got that loan and i still am paying it off, Quite frankly i have never been so insulted i was 21 then a fully fledged adult no other law (of youthfullness) at all in this country applied to me bar that one. Fuckers!!! now that i’m earning a decent wage i’m paying more, and more in normal tax too, double dipping wankers!. we need a system where if you stay and work in this country for lets say 5 years after graduation your loan gets wiped.

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