Charging interest would bring in considerable extra revenue for the Government, but Key said he would be voted out if National did so.
“Bluntly, if you want me to be really crude about it there are 565,000 student loans out there. If we add interest back on the student loans, it doubles repayment time of the loan.
“If your loan is $50,000, and it’s estimated it will take you eight years to pay it off, we effectively turn it into a loan that is about $90,000 with interest that takes you about 15 years to repay,” Key said.
“That is about the only thing that will get [young people] out of bed before 7 o’clock at night to vote, but it’s not politically sustainable to put interest back on student loans. It may not be great economics, but it’s great politics. It is a bit of a tragedy because it sends the wrong message to young people, it tells them to go out and borrow debt.”
I’m surprised they don’t make the argument for interest rates at the rate of inflation. As it is, the value of the loan actually decreases each year. I’m also surprised Key hasn’t securitised the $12 billion dollar loan portfolio, packaged it into opaque financial products that inflated its value a thousand fold, borrowed a trillion dollars from China so the government could buy the loans off itself and paid off the deficit that way.
Maybe next term.