Key defends overseas student loan crackdown

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Interest-free student loans were bad economic policy but Prime Minister John Key says they won't be targeted in changes to the loan scheme.

The Government is cracking down on overseas debtors and is considering shortening the three-year "repayment holiday" currently granted to students who have left New Zealand

Entitlements may be limited to older borrowers and some areas such as pilot training could face reduced limits for borrowing.

Mr Key said a lot could be done to improve the student loan problem over time.

Students who had left the country represented about 15 per cent of those who owed money, but about 55 per cent of the overdue debt.

Mr Key said the interest free loans brought in by Labour sent a bad message to young people and were not good for the economy.

"It wasn't good economic policy and actually I was right," he said.

However, he would stand by his pledge not to change that policy and said now about 580,000 people had the loans.

Mr Key said students who remained in New Zealand paid off the loans relatively quickly compared with those overseas.

"Why shouldn't they be made to repay when they are earning good money overseas?"

Tertiary Education Minister Steven Joyce said yesterday the Government had some success in "chasing money" in Australia. Using debt collection agencies in Britain was under consideration.

The three-year "repayment holiday" sent the wrong message.

"We're thinking we might change the length of that repayment holiday - that's one of the things that we're looking very closely at."

Pilot training was another issue that was being looked at, he said.

"We are currently loaning $30 million a year to people training to be pilots. Most of them don't go on to get jobs as pilots," he said.

"The write-off in terms of student loans (for pilot training) is in excess of 60 per cent, so we're looking pretty closely at whether we're doing that right."

Mr Joyce said loans to people aged over 55 was another big write-off area.

"If you take out a student loan at 55 or 56 there's every likelihood that about 70 per cent of that will be written off because you're at the other end of your working career," he said.

"I think we always want to be able to provide some access, perhaps borrowing for fees. But borrowing for living costs and borrowing for the compulsory course costs is not necessarily where we want to be."

Labour's tertiary education spokesman, David Shearer, said Mr Joyce had been systematically making it more difficult for older people to access education.

"Only a fraction of schools now offer night classes compared to a year ago," he said.

"We have an ageing workforce in a rapidly changing work environment and people need to have the opportunity to adapt and change to meet new employment demands, not having the door slammed in their faces."

- NZPA