Savings will come from tightening eligibility for student loans for over-55s and' />

Funding for tertiary education will be cut in Thursday's Budget.

Savings will come from tightening eligibility for student loans for over-55s and reallocating some courses, including pilot training, elsewhere.

Tertiary Education Minister Steven Joyce said yesterday that there would be no cuts to academic funding, but the Government was aiming to make "material savings" in student loans.

"I think that's fair enough given the challenges that the country faces."

Mr Joyce told the Herald his Government inherited a write-off rate for student loans of 47c in the dollar from the last Government.

The Budget changes would take that down to 43c, and eventually to below 40c.

Last year, the Government paid $1.5 billion in student loans and recovered about half of that.

My Joyce said one area that would be changed this week was pilot training, where almost 60 per cent of the $30 million a year loaned to trainees was written off and few went on to employment in the area.

The Government wanted to ensure that people borrowing for studies were likely to find work that would give them enough income to repay their loans.

"There is more work to be done there," the minister said.

Cuts to eligibility for students aged over 55 would also be made.

Mr Joyce said the Government now wrote off 70c of every dollar loaned to these students.

"There isn't enough time left in their working life to repay their student loans, and while we want people to retrain, we need to make sure they are not borrowing money that they'll never get to pay back."

The Government had already floated the idea of not letting older students borrow for living costs.

Such a restriction could save about $10 million a year.

Mr Joyce also indicated the Budget would impose new restrictions on borrowing by people who already owe money to the loan scheme.

The Herald understands the Government expects its changes to save several hundred million dollars over four years.

As well, Mr Joyce has already said it is planning to step up efforts to recover loan money from borrowers now overseas, by employing debt collectors and by making reciprocal arrangements with other countries.

SAVINGS AIM: $60 MILLION A YEAR

This week's Budget will place new restrictions on student loans, including:

* Barring students over 55 - who borrow $25 million a year - from borrowing for living costs. That could save about $10 million a year.

* Tightening borrowing restrictions for pilot trainees, who borrow $30 million a year, 60 per cent of which is written off.

* New restrictions on borrowers who already owe money from previous studies.

* These and other moves are expected to improve the recovery rate on student loans from 43c in the dollar to 47c.

* Based on current annual lending, that could save more than $60 million a year.