Sunday, March 19, 2006

The truth about student loans

The Sunday Star Times has a good piece by Ruth Laugensen "dispelling myths about student loans". In summary;

1/ There is no obligation to pay back a loan until your earnings get above $16,500

2/ New information reveals women repay their loans a bit quicker than men.

3/ Higher education is not necessarily the path to riches. Of 20,000 who left tertiary study in 1994, by 2000 a quarter were earning less than $10,000 a year.

4/ Students aren't all slack about money. Of any group there tends to be two extremes. One large block will have make no progress on repaying and the other will clear their loan quickly.

5/ The poor do not have the biggest loans. Those coming from high decile homes tend to enter the "expensive" fields of study.

6/ It doesn't take most students decades to repay their loans. The median time taken is 6 years and 7 months.

7/ The interest-free policy will be open to exploitation with some planning and where students have wealthier parents.

(My comment) It's quite obvious that the current scheme, combined with the benefit system, produces the worst of incentives. These will be exacerbated when people don't have to pay any interest.

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