Counting the cost of student loans

Since the student loan scheme was introduced almost a generation ago, more than 894,000 New Zealanders - just over one-fifth of New Zealand's population - have borrowed almost $14 billion.

The money has enabled them to fund their tertiary studies - but how does having a student loan affect graduates in the real world of buying houses and cars, travelling overseas and raising families?

Tertiary education reporter Allison Rudd investigates.

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Last year was momentous for two former tertiary students.

More than a decade after borrowing to fund their studies, Hayden Meikle (33) and Cathie Taylor (37) have both paid off their student loans.

For both, it was a very nice feeling, indeed.

For Mr Meikle, the Otago Daily Times sports editor and now a family man with a mortgage, it meant reclaiming $90 plus a week that had been going out in compulsory loan repayments.

For Mrs Taylor (nee Price), now living in Christchurch with her Canadian husband Dave, it signalled freedom from "an albatross I tried to ignore".

There has been much publicity over the years about the students - mostly medical and dental students with expensive tuition costs to finance - who graduate with enormous five-figure loan balances.

But they are in the minority.

Ministry of Education statistics show most students are like Mr Meikle and Mrs Taylor, both of whom borrowed modestly and have gone on to secure average to reasonably well-paid jobs.

Mrs Taylor completed her studies at the University of Otago in 1998, graduating the following year with a BA in history and a loan balance of about $19,000.

After two years at Dunedin Teachers College and the University of Otago, Mr Meikle switched to Aoraki Polytechnic and completed a national diploma in journalism.

With family assistance, he finished his studies with a loan of $21,215.

Neither regret having to borrow to finance their studies and both say they would not have been able to afford their educations without it.

But the killer for both was interest, which students paid from when the scheme began in 1991 until the end of 2005, when it was abolished by the Labour government.

Mrs Taylor has not kept her statements and does not know exactly how much she has paid, including interest.

Mr Meikle does - $40,042.

As he points out, that would have been a decent contribution to his mortgage.

He says he ignored his student loan when he was single and in his 20s.

But that changed when he met his wife, Saskia, in the mid 2000s and became stepfather to Josef Sigmund (10) and Paige Sigmund (8).

The couple have since had a son, Eli Meikle (2).

Students begin to repay their loans at a compulsory 10c in the dollar once they earn over the income threshold, set this year at $19,084.

Mr Meikle said he wished now he had repaid his loan earlier by making voluntary repayments as well.

"I knew it was accumulating interest but didn't think about it.

It was something which happened in the background.

The payments were coming out of my salary, I got a statement every month and it was slowly coming down, so I moved on and didn't think about it.

"Then you get to the stage in your life where you have three children and someone is taking a lot of money out of your pay cheque every week."

Mrs Meikle had a student loan of "$20,000 plus" too, Mr Meikle said.

Because she was raising children and only working part-time, she was not making any repayments.

Spouses and partners are not responsible for another person's loan, something Mr Meikle said the couple were grateful for.

"We are trying to sustain quite a large mortgage and bringing up three children.

At the moment, the thought of paying her's off is ridiculous.

We just wouldn't have a chance.

It will sit there until such time as she starts paying it off.

She may never do that."

Apart from soaking up disposable income, student loan debts and repayment obligations do not appear to negatively affect graduates' ability to borrow money.

Mrs Taylor and her husband bought a house in Christchurch without difficulty in 2004, while Mr Meikle said he and his wife had "zero problem" buying their first home in 2006.