Home is looking a little sweeter for graduates

New Zealand graduates overseas say wiping the interest off student debt will sweeten the ticket home, but won't stop them from heading overseas.

Labour announced this week plans to erase the interest on student debt for graduates living in New Zealand by April next year. The policy aims, among other things, to reduce the country's "brain drain" and entice graduates back home.

Several New Zealand graduates in London said it was a move in the right direction but they would still pay off their loans faster with fatter salaries overseas.

"The reason I live in London is because of the travel and career opportunities, with more options for how I spend my time outside of work," said Susan Percy, a graduate of Victoria University.

London pay rates also allowed her to pay off the bulk of her $15,000 loan within a year, she said.

Aucklander Reuben Aitchison, a public relations manager in London, agreed: "Most New Zealanders are here [to] experience new things, or because they don't like what is being done to their home country."

Others said the policy might bring overseas New Zealanders home sooner than expected.

"It's a bloody good idea, and it would definitely convince me to return to the land of the long white cloud a lot earlier," said Aucklander Ivan Andrew, who moved to the United Kingdom a year ago to put larger dents into his $28,000 loan.

Hannah Williamson, also in London, said the policy "would sweeten the deal to return to New Zealand".

"If you have something as stressful and financially debilitating as a whopping loan like mine ($50,000), then how can you have a realistic hope of a house, job, children." National continued to attack Labour's student loan policy yesterday, with National's finance spokesman John Key saying Labour's figures did not add up.

Mr Key said the policy could lead to a borrowing blow-out of close to $1 billion a year as students took advantage of the interest-free money.

He said the cost to Labour would be $550 million, rather than the $300 million the party had predicted.

"This policy will lure young people into borrowing more than they should, then tax them for the rest of their lives to fund it."

Education Minister Trevor Mallard said there were checks to ensure people did not abuse the system.

"The way the loan scheme works, it is not possible to get lump sums or a large amount of money upfront or to do unlimited borrowing, so there is very little incentive to take out a loan for this reason."