Student loan borrowers in New Zealand got a break earlier this month when the government decided it would not add interest to new student loans, something the Productivity Commission in the country had been calling for.
According to a news story in Stuff, the Productivity Commission said in a final report on the future of higher education that interest should be included in new student loans and that loans should cover college courses that are approved by the New Zealand Qualification Authority which is tasked with administering the National Certificates of Educational Achievement for secondary school students and is in charged with quality assurance of certificate and training providers.
The report was driven by a request last year by then Tertiary Education, Skills, and Employment Minister Steven Joyce, and then Minister of Finance, Bill English, who had asked the commission to look into higher education over concerns it has remained stagnant and that the tertiary providers don’t seem keen to be first movers or early adopters in changing things.
By tapping on interest to new student loans, the government in New Zealand would have more money to use to target improvements in other aspects of tertiary education including scholarships, said commission chair Murray Sherwin in the report. The report noted the government has been constrained by how much it can spend on higher education in part because of the cost of providing interest free student loans.
While the Productivity Commission pushed for interest rates on student loans, the government in New Zealand opted not to follow the recommendation. In addition to tacking on interest to student loans, the report noted the commission toyed with the idea of giving $45,000 grant to 16 year olds who complete high school to be used for college. While that idea was dismissed, Sherwin said even raising the proposal shows how much money there is “floating around in the system,” noted the report.
At a time when the government in New Zealand is sticking to its guns in terms of interest free student loans countless student loan borrowers in the U.S. are paying interest on their debt each and every month.
The current interest rate on Federal Direct Subsidized and Unsubsidized undergraduate loans stands at 3.76 percent while graduate unsubsidized loans interest rate is 5.31 percent and Direct PLUS graduate and parent loans have an interest rate of 6.31 percent.
Meanwhile, borrowers tapping private lenders for student loans are paying anywhere from a low of 2.78 percent to a high of 10.81 percent on variable undergraduate loans and between 4.6 percent and 12.99 percent for fixed rate loans.
On the graduate level that stands at a low of 2.78 percent to a high of 10.81 percent for variable loans and between 4.60 percent and 12.99 percent for fixed rate loans. The interest rate on Parent Private student loans ranges from 4.37 percent to 10.74 percent for variable loans and between 5.74 percent to 12.87 percent for fixed rate loans, according to LendEDU data.
Author: Andrew Rombach
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