The time taken for student loans to be repaid has halved from eight years to four years, according to recent Ministry of Education advice.

The advice given to the Tertiary Education Minister Pete Hodgson is that the median repayment time for those who finished study in 1999 and remained in New Zealand was eight years but that had fallen to four years for 2005 leavers.

The government’s interest free student loan policy was introduced in April 2006.

Pete Hodgson welcomed the findings saying that the report was a vindication of the government’s decision to proceed with the interest free student loan policy for people who stay in New Zealand after graduation.

“Let’s recall that this policy was met with derision at the time,” Pete Hodgson said.

“National leader John Key said he would oppose it with every bone in his body. There were howls of dismay that students would rush in and take out loans just because they were zero interest, thereby indebting themselves unnecessarily.

“Those predictions have not come to pass. Instead the projected repayment time has dropped like a stone. The report also projects that the total number of borrowers will increase faster than the total amount being borrowed, meaning that the borrowing per student is not ballooning as the nay-sayers predicted.

“Student debt has been a significant social issue ever since the early nineties. Back then National promised to scrap the then Labour government’s fee of $1250 per annum. Instead they more than doubled the fees, which then climbed strongly right through the decade.

“This government has controlled fees, removed interest on loans and made student allowances more readily available. The combined influence of these measures, especially the interest-free policy, is now having its desired effect.

“In our next term Labour wishes to make progress on moving towards, but not directly to, a universal student allowance. “