Student loan interest would 'motivate a lot of people' to vote me out - Key

John Key (Newshub.)
John Key (Newshub.)

Prime Minister John Key says there's no point in putting interest back on student loans, because "someone would campaign to take it back out" and probably win.

Students used to be charged between 7 and 9 percent interest on their loans, from the day they started borrowing. In 2005 Labour promised to scrap interest for borrowers who stayed in New Zealand, a policy widely credited with delivering Helen Clark a third term as Prime Minister.

National decided against putting interest back on when it came to power in 2008, a decision which the NZ Initiative, a right-leaning think tank, says has cost the Government almost $6 billion in write-offs.

Mr Key says there are no plans to bring it back, because it would double the length of time students would take to pay off their loans.

"Years ago I once said the economics is terrible, the politics is good. The real simple version is nothing probably with greater predictability doubles the repayment time of your loans, and that's going to motivate a lot of people to vote against that sort of policy," he told Paul Henry on Monday morning.

A report by the Productivity Commission last week suggested, among 30 other recommendations, putting interest back on loans.

About 730,000 Kiwis have student loans, owing almost $15 billion between them. Mr Key, who plans to run for a fourth term in charge next year, understands that's a lot of potential lost votes.

"Even if you brought it back in, someone would campaign to take it back out."

He says people with an education generally go on to earn more, and the Government benefits from the extra tax it's able to collect.