Hon David Cunliffe
Associate Minister of Revenue
Student loan interest rate held
The headline student loan interest rate will remain at 7 per cent for the year beginning 1 April 2004, Associate Revenue Minister David Cunliffe and Associate Education (Tertiary Education) Minister Steve Maharey said today.
The rate consists of two parts: the base interest rate, which will rise from 4.2% to 5.5%, and the interest adjustment rate, which will fall from 2.8% to 1.5%.
David Cunliffe said the interest adjustment rate is based on the Consumer Price Index for the December 2003 quarter and reflects the decrease in the CPI between that and the December 2002 quarter.
"All full-time, full-year students and part-time, low-income students will continue to qualify for a full interest write-off.
"Borrowers who are no longer students and whose income is under the repayment threshold — currently $15,964 a year — have all their base interest written off.
"Others, on higher incomes, have their base interest capped at 50 percent of their compulsory repayment obligation," David Cunliffe said.
Steve Maharey said changes introduced by the Labour-led government to the student loan scheme are helping to ensure that the costs of tertiary education are being kept affordable.
"Most student loan borrowers qualify for some kind of interest write off and do not actually face the total interest rate of 7 per cent. In the tax year ended March 2003 for example, Inland Revenue records show that 70 per cent of students received some kind of interest write-off," Steve Maharey said.
The rate for the year beginning 1 April 2004 was approved by Order in Council yesterday.