From 1 April no furtherinterest will be charged on student loans for those who livein New Zealand, said Minister for Tertiary Education DrMichael Cullen today

Students who borrow from that datewill only have to repay what they borrow. Those withexisting loans will not be charged any furtherinterest.

"No more will students and graduates be burdenedwith the compounding cost of interest provided they remainin New Zealand. This will save them thousands of dollars inmany cases, and knock years off repayment times," Dr Cullensaid.

The change continues the government's progress inmaking tertiary education more affordable.

"We recognisethat tertiary education is vital. Students and graduatesneed more support if we are to produce the highly skilledworkforce needed to drive the transformation of New Zealandinto a high wage, knowledge-based economy."

Those withstudent loans who travel overseas to work will still have topay interest. "The change is designed to encourage them tostay in New Zealand or to return more quickly to contributeto our economy and society,'' said Dr Cullen.

Note: DrCullen and other Labour MPs will today be celebratinginterest free student loans at Victoria University's quad12.30pm to 1.15pm.

ENDS

For moreinformation: http://www.ird.govt.nz/studentloans

Background

-The Student Loan Scheme Amendment Act 2005 was passed on 21December 2005 and comes into effect on 1 April.

-Interest free loans will be delivered by an interestwrite-off. This means interest will still be charged andappear on statements. However, if a borrower is eligible,this interest will be written off after the end of the taxyear (31 March).

- Only the interest charged after 1 April2006 will be written off under interest free student loans.The new legislation does not cover interest charged beforethis time.

- The first interest write-offs will happen inApril 2007.

Eligibility

- To be eligible, student loanborrowers - whether they are still studying or not - need tobe living in New Zealand for 183 or more consecutive days(about six months).

- Borrowers who live overseas are noteligible for interest free student loans unless they aregranted an exemption (see below for details).

- Borrowerswho have met the 183-day requirement, then leave New Zealandfor 184 or more consecutive days, will lose theireligibility. This means interest charged from the day afterthey leave New Zealand will not be written off.

-Borrowers living overseas, who then return to New Zealand,will become eligible for an interest free student loan oncethey have been back for 183 or more consecutive days (aboutsix months). This means the interest charged from the datethey return will be written off.

What do borrowers needto do?

- Eligible borrowers don t need to do anything toget their interest written off. All interest charged from 1April 2006 will be written off automatically.

- Borrowersmust advise Inland Revenue if they are planning on leavingNew Zealand for three months, and when they get back. Theyalso need to provide any other information required todetermine their eligibility to an interest free studentloan.

Exemptions

- A borrower needs to apply to InlandRevenue for an exemption. An exemption may be granted if theborrower, for example, is: - studying full-time atpost-graduate level overseas - working abroad for the NewZealand Government - absent due to employment oroccupation - a volunteer working overseas - has anunexpected delay returning to NewZealand.
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