Government Set to Wean Addicted Students Off Loan Teat

by Calida Smylie | 3:36 am 10/05/2010

The Government has planned significant changes to student loan eligibility, which include cutting loans to students who take too long to finish their undergraduate degrees and introducing a requirement that students pass half of all their courses to remain eligible.

Tertiary Education Minister Steven Joyce believes the changes would stop failing students acquiring more debt. “You would have a 50 percent pass rate over two years and then there would be a lifetime limit of X number of years where you would say, ‘You can't keep borrowing on your student loan after that period.’” 

The changes will be announced in the May Budget, and aim to save over $20 million annually. Canterbury University Vice-Chancellor Rod Carr, a former deputy Reserve Bank governor, said an alternative option would be to adjust student loans for inflation, which would save up to $200 million a year. However, Joyce has stated categorically that this was not an option currently being considered by the Government.

Joyce has also recently suggested lifting the cap on tuition fees for high-cost courses, which will affect medical students in particular. Under the current fee maxima rules, tertiary institutions must seek permission from the Tertiary Education Commission to raise course fees by more than five percent a year, but Joyce argues that the maxima creates distortions in the market. Tertiary institution pricing was “last looked at in the mid-‘90s and some of them are getting highly distortionary relative to the actual cost of providing the course,” Joyce stated.

Prime Minister John Key backed Joyce’s comments at his Monday press conference. “No one’s underestimating the cost of becoming a doctor, but the rewards on a number of fronts are quite great,” he said. Key did not think fee rises would restrict the number of people working in the relatively lower-payed medical positions, as the Government had programmes to bond doctors and nurses to understaffed rural areas. “I don’t think you’re making it more difficult; you’re just making it slightly more expensive.” 

A 2008 study in the New Zealand Medical Journal found the average graduating student loan of domestic medical students totalled $63 880, while 13 percent had debts of over $90 000.

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