Student loans in New Zealand....

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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 25 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 25 most people have completed tertiary education.

Repayment
While the borrower is a resident of New Zealand, loans are repaid at rate of 10% of income above the minimum income level, 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' Associations found that the average student debt was over NZ$28,000, up 54% from 2004.[1] (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.

Reaction
There is a lot of anger and frustration over the New Zealand loan system, especially from early generations of borrowers (1992�2001). These students consider themselves the 'guinea pigs' of the loan system, who were charged compounded interest from initial draw down and then watched as future generations had interest removed completely. This generation suffered from a lack of education about the consequences of debt, and a lack of role-models to look to for advice. It is no coincidence that some of the hardest hit by previous versions of the loan system were from the poorer families the system was supposed to 'enable'.

The student loan system has succeeded in turning New Zealand into a highly educated economy. However it has also led to a capitalist-minded workforce who frequently leave their home country in order to pursue the better career and loan repayment options available overseas.