Tertiary Education Minister Steven Joyce has firmly denied the Government plans to make students pay interest on their loans again.
Labour says it fears the idea, is being considered, because Treasury documents show the Government was briefed in January about adding interest of 2% to the amount students borrow.
A paper to Finance Minister Bill English says that could save the Government up to $1.1 billion in the five years to June 2016.
At present 45 cents of every dollar loaned is written off, 33 cents of which is accounted for by the lack of interest payments.
However, Mr Joyce says the Government is using other ways to recoup student loan debt and is satisfied with its current schemes.
We're also focussing on bringing back debt from students who have headed off overseas, and that's a big challenge that is really only just beginning so we're confident that we've got things heading in the right direction and there are no plans at all to put interest on student loans.
Labour ended the interest as an election promise in 2005.