21 Mar 2017

What students have to say about putting interest back on student loans

2:15 pm on 21 March 2017



Should student loans be interest free?

Should student loans be interest free? Photo: 123rf

Students aren’t too keen on a proposal to reintroduce interest on student loans.

In its final report to the government on tertiary education, the Productivity Commission called for interest to be charged on loans once student graduate so that the $300 million in interest the government writes off on the loans each year can be spent on other things, such as scholarships.

Two previous draft reports by the commission also recommended that interest be charged to graduates, but the government has always denied the loan system might change.

The commission also said University Entrance should be scrapped as it’s “arbitrary” and likely to prejudice Māori and Pasifika, and that the Government should gradually reduce its subsidies for courses that lead to high paying jobs. This would likely mean more expensive fees for those subjects.

The suggestions haven’t been met with much enthusiasm. The Union of Students Associations told RNZ the recommendations were a bad idea, while Universities New Zealand said the Productivity Commission report was “incoherent”.

Student loans have been interest-free since 2005, which means young people have lived without the fear of that burden for most of their lives.

We ventured out to Victoria University to see how they would feel if that changed:


Frano Ashby.

Frano Ashby. Photo: Max Towle/The Wireless

I try to ignore my student loan. I’ve probably got three more years of study and honestly, I have no idea how much my loan is going to be when I graduate.

I was one of those people who studied something they weren’t originally interested in for practical reasons, and then realised they hated it. So, now I study something I’m interested in.

I definitely don’t think student loan interest should be a thing. I mean, half of the people here are living in mouldy flats with eight other people. If they could afford to live somewhere nice, they might be able to afford interest, but no one here can.

The jobs a lot of people are working part-time while they study aren’t paying a lot, so the student life also seems crippling to them. If your finances are going to build up more after you graduate, I think that’s going to take away the appeal of studying.

Growing up, knowing student loans were interest-free certainly made studying seem more achievable. If I had known that one day interest may return, I think it would have put me off doing as much studying.


Tamar Rice and Nila Ulberg.

Tamar Rice and Nila Ulberg. Photo: Max Towle/The Wireless

My student loan is quite small compared to a lot of others because I had a scholarship for my first year and I stay at home, but that doesn’t mean I don’t want to have to pay interest on it.

I do think about my loan a lot, but honestly I think it will be quite easy to pay off. But I know people living in halls who will have to pay tens of thousands of dollars more than me. I would definitely be more worried for them - I think a lot of them don’t think about their loans very much and don’t realise what’s ahead.

I think if they had to pay interest they would worry about things a lot more, especially as their loans accumulate.


I expect my student loan will build up quite quickly over the years. I don’t worry so much about it at the moment, but I’ll have to think about it more soon.

Interest would change all of that. I would stress about my loan so much more. It would definitely cause me more financial headaches.

I also definitely don’t think my course fees should go up just because what I study could lead to a good job. We have a lot more requirements as part of our degree - such as more papers throughout the year - so we are already paying more and our loans are bigger.


Grace Tattersfield and India Batkin.

Grace Tattersfield and India Batkin. Photo: Max Towle/The Wireless

My student loan is definitely on my mind when I think about doing post-graduate courses like a Master’s or a PhD. The fact it is interest-free helps.

My reaction if they introduced interest on my loan would be… shit. I’d be on the lookout for a sugar daddy. My parents don’t help me out at all, so I spend every penny I have each week.

My boyfriend is a pilot and he has a $100,000 student loan. The interest on that would be huge.

Travelling is high up on the list of things young people want to do. But if you live overseas, then interest kicks in.

I’m doing a degree that might mean I have to move to another country, and I definitely have to take that into consideration. If interest were to be brought back, that would be another worry on top of that.


I don’t think about my student loan when I’m picking courses, but I definitely think about my performance - I wouldn’t want to fail a course because that loan is in the back of my mind. It is very expensive to study in this country.

Growing up, I always assumed student loans would always be interest-free, so I always assumed I would go to university. The student loan part of things wasn’t something my friends or I thought much about. Because they were interest free, it felt like the Government was willing to help people and wanted to motivate them to get a degree.

If they put interest on loans it would be very disappointing. I might not have that same mindset growing up. I might also have thought more carefully about getting a job while doing my degree and maybe spacing it out more.


Alex Rose.

Alex Rose. Photo: Max Towle/The Wireless

Anyone with an interest-free student loan would obviously want to keep it. It means more money for me.

However, I’m not sure that necessarily means it’s good public policy for the government to pay for the interest on a loan - it’s a tricky one.

I’m originally from Australia - the situation there is a scheme which basically means that if you are an eligible Australian undergrad, the government will cover the cost of something like 70 percent of your tuition fees, and you pay the rest. Meanwhile, you can get an interest-free loan to cover that.

It works in that a lot people are able to go to university and don’t graduate with the kind of terrifying debt that someone in the US might have. It’s all pretty manageable. I don’t know anyone back home who is terrified about their debt. If you lose your job and can’t keep paying it back, there are payment stops you can apply for.

Any system that keeps away the kind of stress that interest brings is great for students.


Nick Henderson and Russell Johnson.

Nick Henderson and Russell Johnson. Photo: Max Towle/The Wireless

I’m not in crippling debt just yet, but it’s building and currently standing at about $8500. I worked over the summer so I didn’t have to get those extra entitlements this year for textbooks and stuff.

I do think about my loan and try to put away a good amount of savings each week into a term deposit.

If interest on loans was brought back, I would do things very differently because I do think a lot about debt and money. I would probably take a year off to save, so I didn’t have to walk out the door here with that crippling debt that grows every day.

It’s enough of a battle worrying about trying to get into the housing market.


Hearing about this is enough to raise the stress levels.

I’m already going to be faced with having to pay back a lot of money and not being able to work as many hours per week as other people, so this would be massively unfair and difficult.

The idea that course fees for subjects such as mine might go up is not very enticing at all. Textbooks, for example, are massively over-priced.

I do stress about my loan, and I do worry about having to pay it all back at the end.