Student Loans
Research and statistical information derived from the student loan scheme.
Introduction
The student loan scheme was introduced in 1992. It provides access to funding for course fees, course-related costs and living costs – so that students can defer paying for their share of the costs until the benefits of their study are realised in the income they earn. It is an income-contingent scheme, whereby repayments depend on the earnings of borrowers.As at 31 December 2006, over 712,000 people had used the student loan scheme since it was launched.
Three government agencies are involved in managing the scheme. These are Ministry of Education (responsible for strategic policy), the Ministry of Social Development (responsible for administration and delivery of student loans) and Inland Revenue (responsible for maintaining loan accounts).
The history of the student loan scheme
1992 - The student loan scheme is introduced. Students can borrow their course fees, course costs of up to $1000 per year, and living costs of $150 per week (to a maximum of $4500 per year.) Repayments are made through the taxation system at the rate of ten percent of income in excess of a threshold which is reviewed annually. The interest rate is related to the government cost of borrowing and consists of a base rate and a (cpi-related) interest adjustment. Any interest arising from the base rate that is not covered by a borrower’s repayment obligation is written off for New Zealand residents. Interest write-offs are not available to current borrowers.
1996 - The interest rate is set using the average of past and prospective 10 year bond rates plus a margin of 0.9%.
1997 - Students can borrower up to $150 per week for living costs (less any allowance entitlement). The annual limit of $4500 no longer applies.
1998 - Some restrictions are made to student loan borrowings and the way in which they are made: (i) The living cost is paid in fortnightly direct credited instalments (previously there were 3 annual instalments throughout the year) , (ii) the compulsory fee entitlement is paid directly to providers (not to students) , (iii) the course cost entitlement is reduced from $1000 to $500, (iv) parental consent is required for students under 18 to access student loans, (v) Payment of student union fees through the compulsory fee component is abolished.
2000 - The ‘no-interest while studying’ policy is introduced for full-time students and part-time students on low incomes. Students can also borrow for student association fees. The interest rate is set at 7 percent.
Interest write-off provisions are relaxed so that any interest arising from the base rate that is not covered by 50% of repayment obligations is written off.
2001 - From 1 January 2001, only qualifications that receive Student Component funding or other government funding are eligible for student loans (and student allowances).
2002 - Eligibility to student loans (tuition fees and course costs components only) is extended to prison inmates on approved offender management programmes.
2004 - Part-time, part-year students undertaking a course load of 0.3 EFTS or more are given access to the tuition fee component of the student loan scheme.
2005 - Access to student loans for part-time part-year students is further extended for students with a course load between 0.25 and 0.3 EFTS, subject to vocational and employment criteria.
2006 - The interest-free policy comes into effect. This means that borrowers will not pay any interest as long as they meet residency requirements. An amnesty on penalties for overseas borrowers not meeting repayment obligations is introduced.
2007 - The amnesty is extended allowing overseas borrowers a three-year repayment holiday. The annual compulsory repayment obligation is also simplified for these borrowers.
The vocational and employment criteria for student loan eligibility for part-time, part-year students, undertaking a course load of between 0.25 and 0.30 EFTS is removed.
Future Changes - From 1 January 2009 the living cost component of the student loan scheme will increase from a maximum of $150 per week to $155 per week. The maximum entitlement will be annually adjusted for inflation with the first adjustment occurring on 1 April 2009.
Key Statistics
Table 1 provides some key statistics on student loans. It provides student loan borrowing, repayments and balances from 2001/02 to 2006/07 and forecasts till 2011/02 (BEFU2008). More detailed statistics on student loan can be obtained from the Financial Support for Students statistics page.
| Fiscal Year | Loan borrowings ($m) | Loan repayments ($m) | Loan balances ($m) |
|---|---|---|---|
| 2001/02 | 934 | 395 | 5,386 |
| 2002/03 | 952 | 438 | 6,094 |
| 2003/04 | 997 | 509 | 6,821 |
| 2004/05 | 969 | 572 | 7,499 |
| 2005/06 | 1,046 | 551 | 8,370 |
| 2006/07 | 1,176 | 555 | 9,413 |
| 2007/08 | 1,201 | 611 | 10,075 |
| 2008/09 | 1,296 | 675 | 10,771 |
| 2009/10 | 1,389 | 758 | 11,489 |
| 2010/11 | 1,473 | 838 | 12,234 |
| 2011/12 | 1,558 | 924 | 13,008 |
Notes:
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Table 2 below presents the number of total borrowers and new borrowers from 2002.
| Academic Year | Total borrowers | New borrowers |
|---|---|---|
| 2002 | 150,575 | 62,763 |
| 2003 | 156,286 | 60,131 |
| 2004 | 157,041 | 55,379 |
| 2005 | 154,417 | 51,443 |
| 2006 | 167,425 | 60,016 |
| 2007 | 173,791 | 57,604 |
Notes:
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Publications
The Education Counts website contains a number of analytical reports on student loans and borrowers. Many of these studies have used the Integrated Dataset on the Student Loan Scheme, maintained by Statistics New Zealand that links data from the three agencies involved in the scheme. More information about the integrated dataset is available on the Statistics New Zealand website.
The Student Loan Scheme Annual Report home page
The home page for the annual report on the Student Loan Scheme. An annual report is tabled each year in Parliament containing the annual financial statements of the scheme, data on the level of people's loans, repayment information and information on the costs of the loan scheme.
Author: Ministry of Education, Inland Revenue, and Ministry of Social Development
Date Published: Annually
Does the student loan scheme discourage students from returning to study?
This report has been initiated by the Ministry of Education in order to gain an insight into educational pathways and the aspirations of former tertiary students who return to study. By establishing a demographic, educational and borrowing profile of returning students, this reports aims to identify the factors affecting student return to study. In particular, the study focuses on the impact of an individual’s student loan borrowed for previous studies on their return.
Author: Sarah Tumen & Boaz Shulruf
Date Published: September 2007
Do Student Loans Drive People Overseas - what is the evidence?
This report applies statistical modelling to the integrated dataset on the Student Loan Scheme . It provides interesting new information on the likelihood of a borrower being declared overseas five years post study across a variety of characteristics such as size of student loan leaving balance and level of study.
Author: Warren Smart
Date Published: May 2006
This paper explores the characteristics of borrowers who have not made any progress in reducing their student loan balances. The paper complements a related paper, Paying off a student loan, which explores the progress to full repayment for Student Loan Scheme borrowers.
Author: Roger Smyth and Jamie Hyatt
Date Published: August 2005
Living with a student loan, a profile of student loan debt and repayment, post-study income and going overseas
This report profiles student loan debt and repayment, post-study income and going overseas. One of two analytical reports using previously unavailable information from Statistics New Zealand's integrated dataset on Student Loan Scheme Borrowers.
Author: Fiona Griffin, David Scott and Roger Smyth
Date Published: March 2005
Income of Student Loan Scheme Borrowers
This report provides new information on the impacts of the Student Loan Scheme by looking at the income of those who used the scheme between 1997 and 2000. One of two analytical reports published using previously unavailable information from Statistics New Zealand's Integrated Dataset on Student Loan Scheme Borrowers.
Author: Jamie Hyatt, Paul Gini and Roger Smyth
Date Published: March 2005
Paying off a student loan - an analysis of progress to full repayment from the integrated dataset
This report analyses the experience of Student Loan Scheme borrowers in repaying their student loans. This report complements a related paper, Who doesn’t pay back, that examines the characteristics of those who make no progress to repayment of their student loans.
Author: Jamie Hyatt
Date Published: August 2005
New Zealand Government Sites of Interest
The Ministry of Education is the government department responsible for the education of the nation. It is also responsible for strategic policies in relation to the Student Loan Scheme.
StudyLink, a service of the Ministry of Social Development, is responsible
for the administration and delivery of student loans to students during the year of study. After the end of each academic year the Ministry of Social Development transfers those loans to Inland Revenue for collection. You will find current borrowing information on the StudyLink web site.
Statistics New Zealand is a government department and New Zealand's national statistics office It is the country's major source of official statistics. Statistics New Zealand maintains the integrated dataset on Student Loan Scheme borrowers. More information about the integrated dataset is available on the Statistics New Zealand website.