Restricting the student allowance to four years of study punishes medical students and postgraduates and will push them overseas, critics of the change say.
Tertiary Education Minister Steven Joyce this week announced a raft of changes to student loan and allowance schemes before the May 24 Budget, which included a-four year limit on student allowances.
Mr Joyce said the changes would create $60 million to $70 million per annum in savings for the Government, which would be reinvested in the tertiary sector.
New Zealand Medical Students' Association president Michael Chen-Xu said restricting student allowances would force some medical students to borrow more, which could cause them to leave New Zealand once they graduated.
"We know that student debt is one of the greatest drivers of medical graduates away from New Zealand," Mr Chen-Xu said.
It would also discourage people from lower socio-economic backgrounds from taking up medicine, he said.
This was because people from poorer backgrounds often studied for three years before entering medicine and, under the new system, people who gained entry this way - 20%-25% of medical students - would have their allowance cut off early in their training.
Combined with the introduction of a seven-year cap on student loans in 2010, the change to allowances represented a "double-whammy" for people who studied before entering medicine.
He said the "financial stress" caused by removing the allowance could also be to the "detriment " of students' education.
Otago University Students' Association postgraduate representative Victoria Koszowski said the change to the student allowance would add to the already large numbers of postgraduates who went to Australia and elsewhere to study.
"New Zealand is already facing an issue of the flight of human capital so what you want to do ... is to assist [postgraduate students] as much as possible," Ms Koszowski said.
It could also force students to take up part-time work, which could be detrimental to their research, she said.
The Green Party has proposed an alternative to raising the student loan repayment rate to 12%, instead saying there should be a graduated system where people who earn more have to pay more.
"Those on lower incomes would pay less on their student loan debt than the current rate of 10c in the dollar, while those on higher incomes would pay more.
"This would achieve faster repayment rates without placing an unnecessary burden on low-income graduates and young families," Green Party students spokeswoman Holly Walker said.
