Medical students and post-graduates will no longer get Government support in the final years of their degrees under stricter new rules which critics say will worsen the brain drain.

The National-led Government has announced that long-term students will not get access to student allowances and 500,000 New Zealanders with student loans will have to pay them back more quickly.

Tertiary Education Minister Steven Joyce expected the changes to save $250 million at first, and $70 million a year from the higher repayment scheme. The Government was keen to chip away at student loan debt of $11 billion, and make sure allowance schemes focused on early years of tertiary education and students from low-income families.

The Opposition and student bodies said the changes would increase the exodus to Australia, which had a more lenient repayment scheme.


At present, New Zealand tertiary students were entitled to an allowance for 200 weeks, and if they needed support for post-graduate study they had to seek an extension.

That extension will now be ditched, and Government says students studying for more than 200 weeks will have to support themselves.

Mr Joyce said this would affect several thousand people and was fair because post-graduates were likely to be earning a higher income when they left university.

The savings made from the changes would be injected into science and engineering education. But student associations said other key fields - medicine, dentistry, veterinary medicine, and all post-graduate programmes - would be affected by the allowance restrictions.

New Zealand Medical Students' Association president Michael Chen-Xu said medical students now faced a "double-whammy" of a seven-year cap on their loans and a four-year cap on their allowances.

"We know that student debt is one of the biggest drivers of medical students away from New Zealand, so all of these factors could reduce retention."

Around a quarter of medical students studied for three years before entering medicine, and Mr Chen-Xu was concerned that their allowance would be exhausted early in their medical degree.

The changes could also prevent students from poor families becoming doctors.

A spokesman for Mr Joyce said trainee grants were available for medical students. But Mr Chen-Xu said these were limited, and usually required students to pay their fees upfront first.

Mr Joyce also announced that the repayment rate for student loans would be increased from 10 per cent to 12 per cent for any earnings over $19,084, beginning next year.

This meant a person earning the average wage of $923 a week would pay back $66.90 a week instead of $55.80, on top of an income tax of $114.40.

Green Party youth and student issues spokeswoman Holly Walker said this increase nearly wiped out the income tax cuts introduced by the National-led Government.

The Government was also considering scrapping the reward scheme for borrowers who voluntarily repaid more money. Mr Joyce said: "This has not created the increase in repayments we had hoped."

The incentive was introduced three years ago, and cost $12 million a year. Mr Joyce said it was difficult to gauge how effective it was, and the party had decided this money should be invested directly into the tertiary sector.


Carmen Nutira planned to get a post-graduate psychology degree to help counsel victims of the Christchurch earthquake, but is now having second thoughts.

The 22-year-old AUT University student, who moved to Auckland after the first major quake in September 2010, is in her second year of studies and was planning four more years. But she said she may lower her goals after the Government announced it would cap student allowances at 200 weeks, or four to five years of study.

"I was imagining being able to graduate with honours, go on to do the masters, essentially to get the counselling and psychologist qualification, which is a six-year degree."

She had suffered post-traumatic stress after the quake, and now wanted to make a living in treating people with the condition.

"But it's hard enough to make ends meet. Rent and power prices are all going up, so ... without an allowance it will be way too hard."

Ms Nutira qualified for a student allowance of around $200 a week because her solo mother earned less than the threshold of $55,000. She estimated that her loan after two years was $20,000, but she expected it to be $40,000 when she completed her bachelor's degree.

* Borrowers repay 10 per cent of earnings over $19,084.
* Borrowers who voluntarily repay $500 or more receive 10 per cent bonus on that amount.
* Student allowance available for 200 weeks plus extensions.

* Borrowers repay 12 per cent of all earnings over $19,084 (from 2013).
* Bonuses being reconsidered, could be scrapped in March 2013.
* Student allowance available for 200 weeks without extension.
* Four-year freeze on parental income threshold for allowances.

* Borrowers pay back 4 per cent of earnings over $48,000.