A fee is fair
A proposed annual fee to be charged to more than 500,000 Kiwis with student debt will net the Government at least $15 million.
The fee, expected to be charged at about $50 a year on every person with student debt, is being floated as part of a package to try to recover the spiralling cost of the student loans scheme. …
The Government was “looking at” extending an annual fee system to charge everyone with student-loan debt between $40 and $50 as long as they have money owing. Students already pay a $50 fee every year that they borrow to study.
“The view I have taken of it is that I actually don’t think that is fair when you consider it compared with any other form of loan you have,” Joyce said.
“We’re looking at an ongoing account fee which will be a flat amount and just helps to recover the costs of administering the loan system.”
Administration of the scheme cost about $50m a year, and the existing fee collected only about $10m every year.
“There is a $40m hole,” Joyce said. “The writeoff of the administration costs is massive and so what we’re looking at is whether we can come up with a reasonable fee which people continue to pay as long as they’ve got a loan account.”
Loan recipients benefit to the tune of thousands of dollars by having the loans interest free. I don’t see why the administration costs of the scheme should also be picked up by the taxpayer. The proposed $40 to $50 annual fee is modest and will not even fully cover the administration costs.
Figures to be released today show that the total amount borrowed has increased by 20 per cent in the first three months of this year compared with the same period last year.
The increase came from a rise in the number of students taking out loans (up 13 per cent) and the amount each borrowed (up 6 per cent for fees and 5 per cent for living costs).
More and more students will take advantage of interest free loans, even if they don’t need the money. It is human nature. At some stage a Government will need to look at charging interest again – even if only to cover inflation.