Students offered cheaper way to pay loan

By LIBBY MIDDLEBROOK AND NZPA

Students will be able to pay back their Government student loans more cheaply through a new corporate banking package.

WestpacTrust is making $50 million a year available to tertiary graduates.

Under the new package graduates can borrow up to $20,000 at 1 per cent interest for one year, 2 per cent for two years and 3 per cent for three years to pay off student loan debt.

Government student loans are currently charged at 7 per cent interest but graduates with lower salaries pay less.

A WestpacTrust $20,000 loan over a one-year term would accrue only $200 in interest compared with a Government student loan accruing $618.98 in interest in the same period.

Few students, however, could afford to repay the bank $20,000 over 12 months - repayments would be more than $380 a week. A 20,000 loan from the bank over two years would cost more than $190 a week.

WestpacTrust's general manager (retail), Ross Aitken, said the new graduate loan could save graduates thousands of dollars in interest payments.

"I believe that not only is this the best offer available to graduates, it is socially and financially responsible," he said.

"The economy and the whole community will benefit if graduates are paying off debt more quickly."

Students can apply for the unsecured loans up to 36 months after completing their studies and may use them only to pay back money borrowed from the Government.

Graduates will be charged higher interest rates if they fail to pay back the loans within the specified period.

The University Students Association has some concerns about the WestpacTrust scheme and is advising students to investigate it carefully before making commitments.

"The scheme looks very generous on the surface. However, only very highly paid graduates with small student loans will be able to pay off $20,000 in under three years," said Andrew Campbell, association co-president.

Mr Campbell called on the Government to cut loan rates to better the WestpacTrust offer.

"If a business like WestpacTrust can charge graduates such low interest rates, then why can't the so-called friendly Government cut its interest rate from 7 per cent?"

A spokesman for the Associate Minister of Education, Steve Maharey, said only 20 per cent of graduates paid the full interest rate of 7 per cent. He said the Government's student loans did not incur interest while students were studying, unlike corporate banks' loans.

The ANZ and ASB said they were not considering offering graduates a similar package, but they did offer cheap overdrafts and loans.