Student allowance cutbacks flagged

Steven Joyce. Photo / Sarah Ivey

Tertiary education minister Steven Joyce has indicated that student allowance eligibility will be cut back in the Budget.

He said today the Government had already signalled strongly that it was concerned about a blow out in the costs of student allowances, the costs of which which had gone from $385 million in 2007/08 to $620 million in 2010/11.

He said that was largely because of changes to the parental income threshold adjustments introduced under the Labour government.

"We can't keep sustaining those sort of increases so we are looking for changes."

He said more details of the changes would be released in the lead-up to the Budget.

Mr Joyce froze the parental income threshold in March this year, saying it had increased well ahead of wage growth and inflation.

The freeze was expected to affect about 1,500 students who would have been eligible for a partial allowance if the threshold had increased.

The Government has also already indicated further changes to the student loan scheme.

It has promised to keep interest free student loans in place for borrowers who lived in New Zealand, but has already increased payment requirements for overseas borrowers and has indicated further changes are possible to eligibility.

Under the current rules, students qualify for a full student allowance if their parents' combined income is lower than $55,026. It abates above that up to $83,449.01 for students who live at home, or $90,554.74 for students who do not live at home.

Partners' income is also tested - students and/or their partners can earn up to $206.73 before tax before their allowances start to abate.