Government rejects Productivity Commission's call to reintroduce interest on student loans

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The Government says it won't take up a recommendation by the Productivity Commission to reintroduce interest on student loans.

University students in a lecture hall.

Source: Seven Sharp

The commission has issued a wide-ranging report on new models for tertiary education and makes 49 recommendations for improvement. 

Finance Minister Steven Joyce, and Tertiary Education, Skills and Employment Minister Paul Goldsmith have welcomed the release of the report.

Mr Goldsmith says the Government will keep an open mind on all the recommendations, with the exception of the commission's view that interest should be reintroduced on new student loan borrowing.

"The Government is committed to retaining interest-free student loans for borrowers residing in New Zealand," Mr Goldsmith said.

"We do not want to see young people starting their working lives with unmanageable debt. We know that for those who stay in New Zealand after graduating, half will have repaid their loan in under six and a half years," he said.

The commission's recommendations include improving information and its use across the tertiary education system, improving regulatory settings, particularly around quality assurance and reforming how Government purchases tertiary education.

The commission also wants to ensure there are clear roles, accountabilities and expectations to drive better, and more innovative, tertiary education performance.

Mr Goldsmith says the Government will carefully consider the commission's recommendations over the coming months. 

"We have work underway on some of the matters raised such as improving the accessibility of information for prospective students," he said.

The New Zealand Union of Students' Associations says it's disappointed by the recommendations.

NZUSA says while the commission has made some promising recommendations, including the provision of better careers education for prospective and current students, it has failed to meaningfully advance student interests.

"This report is a missed opportunity to put students at the centre of the education system. The Productivity Commission has said they have empowered student choice, but instead they're giving power to tertiary education institutions to do what they like," said Jonathan Gee, National President of NZUSA.

The association says the commission has gone outside its terms of reference to push for the introduction of interest on student loans.

"They have gone outside their brief in support of an unpopular and ineffective proposal," Mr Gee said.

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