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Government to ignore calls for interest to be added to student loans

Minister for Tertiary Education, Skills and Employment, Paul Goldsmith says the Government will not start charging interest on student loans.

The Productivity Commission has stuck to its guns in recommending interest be added to new student loans, but the Government is sticking to its own – saying it will not happen. 

The commission has released its final report on the future of tertiary education, reiterating the position outlined in the draft that interest should be reintroduced to student loans. It also suggested loans be extended to students for tertiary courses that are New Zealand Qualification Authority approved.  

However the New Models of Tertiary Education report, dropped the idea of giving school-leavers a $45,000 grant for their tertiary education, which had been raised in the draft. 

The Government is rejecting calls for students to be charged interest on their loans.

The commission was also recommending University Entrance be abolished, and that schools provide better career advice for school leavers. 

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Minister for Tertiary Education, Skills and Employment, Paul Goldsmith said, despite the recommendation to bring back interest on loans, the Government was committed to keeping the scheme interest-free for borrowers living in New Zealand. 


Productivity Commissioner chair Murray Sherwin says bringing interest back could free up Government money in the tertiary sector.

It would keep an open mind on the commission's other recommendations. 

Early last year the commission was asked to look into what was happening within the tertiary sector by the then Tertiary Education, Skills, and Employment Minister Steven Joyce, and then Minister of Finance, Bill English. 

Ministers were concerned about "considerable inertia" and noted tertiary providers appeared to be reluctant to be "first movers" or "early adopters". 

Bringing interest back on student loans would give the Government more money to play with, which could be targeted elsewhere, including scholarships, commission chair Murray Sherwin said. 

The Government was constrained in how much it could spend on tertiary education, partly because of the cost of the interest-free student loan scheme. 

The commission had also floated the idea of a $45,000 school leavers fund, to be given to 16-year-olds. In the end that was too hard, Sherwin said, but had served to highlight how much money there was "floating around in the system". 

In terms of career advice, while there may be some good careers advisors sitting in schools doing fantastic work, it was by chance, rather than design, Sherwin said. 

Acting inquiry director Kevin Moar said provision was patchy in schools, but feedback suggested reform was widely supported. The Ministry of Education had indicated work in the area was already underway. 

In May last year it was announced Careers New Zealand would become part of the Tertiary Education Commission, which was expected to improve careers advice in schools. 

Labour education spokesman Chris Hipkins said while the current University Entrance qualification might not be fit for purpose, he would not like to see it done away with completely. 

The reason the qualification existed was to make sure students knew they were ready to enter university. 

Labour wanted to "beef up" careers advice in schools, and Hipkins said some kids were shutting off options too early, choosing narrow subject fields. 

Universities New Zealand executive director Chris Whelan said the commission had lost sight of the big picture, and in taking a very strong student focus, had not considered the large amount of research that went on at a tertiary level. 

The organisation agreed with many of the things the commission had identified as things holding institutions back, like too many regulations, and funding restrictions. 

He disagreed with a suggestion that more providers should exist in the market, and said that suggestion was widely panned when the draft report was released late last year. 

University Entrance gave high school students a very clear goal to aim for, as getting it showed students they were ready to succeed at university, he said.




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