The student loan interest rate is to remain at 7 per cent for this year, but could change after a review of student support, the Government said today.
Revenue Minister Michael Cullen and Tertiary Education Minister Steve Maharey said the total base rate would drop from 5.1 per cent to 4.2per cent and the interest adjustment rate would rise from 1.9 per cent to 2.8 per cent.
The interest rate adjustment rate was based on the consumer price index for the December 2002 quarter, which had risen from the December 2001 quarter.
"The total rate is to remain the same for the coming tax year (from April 1), pending the Government's review of student support," the ministers said in a statement.
"The review will look at ways to make student allowances available to a greater number of students, while setting out fair rules for determining the contribution students make to the cost of their study."
Their statement did not say whether the interest rate would be reviewed up or down.
The Government currently provides loan interest write-offs for full-time students and low income earners. Those who do not reach the repayment threshold have a total interest write off.
Inland Revenue estimated that in the 2002/2003 year, 57 per cent of interest accrued was written off.
Collectively, loan borrowers owe taxpayers about $4.5 billion as at the end of December last year, with the average loan balance being about $13,000 and the highest about $166,000.
A report on the period from October to December last year, showed that about $71 million was owed in overdue student loan payments.
Almost half the overdue amount is owed by about 6600 borrowers now living overseas. The rest is owed by about 27,700 borrowers still in New Zealand.
