Student loans in New Zealand
Encyclopedia
New Zealand
provides student loans and allowances to tertiary students who satisfy the funding criteria. Full-time students can claim loans for both fees and living costs while part-time students can only claim training institution fees.
A non-refundable means-tested student allowance for living expenses can be claimed by students who are over 24 years old or whose parents have a low income. This criteria has caused anger among student bodies who point out that it excludes many self-sufficient adults from help due to parental income levels, and also that by age 24 most people have completed tertiary education.
From 2001, all full-time students have been exempt from interest while studying, and from 2006 all borrowers resident in New Zealand have been exempted interest.
Loan recipients who leave New Zealand are assessed on their loan balance for repayment purposes, with a minimum annual payment being required. Loan repayments can be suspended on request for those on no/low income overseas, however interest still accumulates.
On 22 March 2007, the government introduced a three-year 'loan repayment holiday' for those overseas. In practice this is a uniform extension of the previous ability to waive repayments until a later date. As before, interest accumulates during this period.
found that the average student debt was over NZ$28,000, up 54% from 2004. (For comparison, the average annual income (before tax) of New Zealanders aged 15 or more was nearly NZ$35,000.)
The loan system has changed and modified since its inception in 1992.
Initially it provided bulk payments to students and charged lower than market interest rates from initial drawdown. This led some entrepreneurial students to use this money for investment purposes benefiting them but leading to a widespread perception of student excesses.
In 2001 a growing debt mountain caused the new Labour government
to stop interest payments while students studied and in 2006 they rode to election on the promise of stopping interest for all those remaining in New Zealand. Nonetheless the total student debt reached $10 billion in 2008, and is growing by $1 billion annually.
New Zealand
New Zealand is an island country in the south-western Pacific Ocean comprising two main landmasses and numerous smaller islands. The country is situated some east of Australia across the Tasman Sea, and roughly south of the Pacific island nations of New Caledonia, Fiji, and Tonga...
provides student loans and allowances to tertiary students who satisfy the funding criteria. Full-time students can claim loans for both fees and living costs while part-time students can only claim training institution fees.
A non-refundable means-tested student allowance for living expenses can be claimed by students who are over 24 years old or whose parents have a low income. This criteria has caused anger among student bodies who point out that it excludes many self-sufficient adults from help due to parental income levels, and also that by age 24 most people have completed tertiary education.
Loan composition
The student loan comprises three parts:- Compulsory fees - covers tuition fees, various levies, and compulsory student association fees. These are paid to the institution directly.
- Course-related costs - covers stationary, textbooks, equipment, etc. and voluntary student association fees. The borrower is allowed up to $1000 per year in course-related fees, which the can claim over the year. These are paid into the borrower's bank account.
- Living costs - covers rent, food, services, etc. The maximum payment for living costs, for the year to 31 March 2011, is $163.38 per week minus any student allowance received. This figure is adjusted every year in April to account for inflation.
Repayment
While the borrower is a resident of New Zealand, loans are repaid at a rate of 10 cents for every whole dollar of taxable income earned over the repayment threshold of $19,084 per annum ($367 per week), an amount roughly equivalent to the unemployment welfare benefit is exempt from assessment.From 2001, all full-time students have been exempt from interest while studying, and from 2006 all borrowers resident in New Zealand have been exempted interest.
Loan recipients who leave New Zealand are assessed on their loan balance for repayment purposes, with a minimum annual payment being required. Loan repayments can be suspended on request for those on no/low income overseas, however interest still accumulates.
On 22 March 2007, the government introduced a three-year 'loan repayment holiday' for those overseas. In practice this is a uniform extension of the previous ability to waive repayments until a later date. As before, interest accumulates during this period.
Increasing debt
Average student loan balances have increased substantially over time. For instance, a 2007 survey by the New Zealand Union of Students' AssociationsNew Zealand Union of Students' Associations
The New Zealand Union of Students' Associations is a representative body that advocates for the interests of tertiary students in New Zealand. It has 14 member students' associations, with a combined membership of over 180,000 students...
found that the average student debt was over NZ$28,000, up 54% from 2004. (For comparison, the average annual income (before tax) of New Zealanders aged 15 or more was nearly NZ$35,000.)
The loan system has changed and modified since its inception in 1992.
Initially it provided bulk payments to students and charged lower than market interest rates from initial drawdown. This led some entrepreneurial students to use this money for investment purposes benefiting them but leading to a widespread perception of student excesses.
In 2001 a growing debt mountain caused the new Labour government
46th New Zealand Parliament
The 46th New Zealand Parliament was a term of the Parliament of New Zealand. Its composition was determined by the 1999 elections, and it sat until the 2002 elections....
to stop interest payments while students studied and in 2006 they rode to election on the promise of stopping interest for all those remaining in New Zealand. Nonetheless the total student debt reached $10 billion in 2008, and is growing by $1 billion annually.