### Borrowing and leaving debt

#### Borrowing and leaving debt increases

The number of students borrowing in a year under the student loan scheme reached a high of 178,506 in 2008, up 2.7 percent from 173,763 in 2007. This increase occurred despite a 4.8 percent drop in the total number of students enrolled, from 500,214 in 2007 to 476,376 in 2008. The number of tertiary students leaving study with debt increased 30.2 percent to reach 86,445 in 2007, from 66,405 students in 2006 (although some of these students may return to study in subsequent years). While the majority of data is for 2008, for students leaving study the latest year available is 2007. See 'Technical notes' in this release for more details.

Of students enrolled in 2008, 37.5 percent received financial assistance through the student loan scheme, compared with 34.7 percent in 2007. This rise is a continuation of the upward trend from 2005 when 30.2 percent received financial assistance through the student loan scheme. Not all students are eligible to borrow. The Ministry of Education calculates that 69 percent of those eligible to borrow in 2008 did so, up from 66 percent in 2007.

Students aged 24 years and under made up 63.1 percent (112,623) of students who borrowed in 2008 and had the largest increase in the number of borrowers, up 5,187 from 2007. Over 50 percent of students aged 24 years and under received financial assistance through the student loan scheme – 57.4 percent of students aged less than 20, and 53.2 percent of students aged 20–24. The proportion of students who borrow under the scheme has been increasing since 2005 across all age groups, except for those aged 60 years and over (60+) which decreased from 18.4 percent in 2006, to 17.0 percent in 2007, and to 14.6 percent in 2008. Students aged 60+ had the largest decrease in the number of students who borrowed in a year, from 3,345 in 2007 to 2,640 in 2008 (down 705).

In 2008 the average amount borrowed in a year was $6,950, up 2.4 percent from $6,790 in 2007. The average leaving debt also increased 2.5 percent, from $14,620 in 2006 to $14,980 in 2007. This continues the general upward trend in average borrowing in a year and leaving debt recorded since 1992 when the student loan scheme began, as shown in the graph below. The fee stabilisation policies from 2001 to 2003, and the fee and course costs maxima policy from 2004, have restricted fee increases by providers.

#### New borrowers

There were 54,321 new borrowers (students using the student loan scheme for the first time) in 2008, similar to the number in 2007 (54,315). Notable increases in the number of new borrowers occurred in 2000 and 2006, shown in the graph below. These increases coincided with the introduction of the interest-free loans while studying policy of 2000, and the 2006 interest-free policy for borrowers living in New Zealand.

#### Average leaving debt by age

In general, students who study at a higher level leave study with greater debt. Students aged 20–24 had the second highest leaving debt in 2007 ($19,110) and had the largest proportion who left study at bachelors level or above (52.7 percent) in 2007. This age group had the largest proportion of leavers with student loan debt, at 31.5 percent (27,252 students) of all leavers. Students aged less than 20 had the lowest average leaving debt ($8,440) but also had the largest proportion of students with leaving debt studying below bachelors level (86.1 percent of students aged less than 20 who left study in 2007).

Students aged 60+ had the highest leaving debt in 2007, with an average leaving debt of $22,000, a 60.3 percent increase from $13,720 in 2006. A large proportion of students aged 60+ (72.2 percent) attended a private training establishment, and data is not available on their level of study. The number of students aged 60+ who left with debt in 2007 more than doubled compared with those who left in 2006, increasing from 960 students in 2006 to 2,136 in 2007. However, students aged 60+ made up only 2.5 percent of all leavers with debt in 2007 (2,136 out of 86,445).

### Repayments

#### Proportion of debt repaid within five years decreases

Borrowers who left study in 2003 had repaid an average of 23.3 percent of their leaving debt in five years, from $14,110 on leaving in 2003 down to $10,820 in 2008. This proportion is lower than those who left study in 2002, who had repaid 24.4 percent.

By 2008, students aged 40–44 when they left study in 2003 had repaid an average of 27.7 percent of their leaving debt, the highest proportion of any age group. In contrast, students who were aged 60+ on leaving owed 14.2 percent more in 2008 than when they left study in 2003.---PDF BREAK---

Average Student Loan Debt by Age GroupFor students who left study in 2003 | ||||

Average debt ($) | ||||

Age on leaving study (years) | Number of students who left with debt in 2003 | Leaving debt in 2003 | Five years post-study | Proportion repaid five years post-study |

Less than 20 | 5,907 | 8,390 | 6,380 | 24.0 |

20–24 | 15,528 | 17,820 | 13,120 | 26.4 |

25–29 | 7,569 | 17,850 | 14,860 | 16.8 |

30–34 | 4,689 | 11,970 | 9,120 | 23.8 |

35–39 | 3,225 | 9,450 | 6,960 | 26.3 |

40–44 | 2,421 | 8,810 | 6,370 | 27.7 |

45–49 | 1,590 | 8,840 | 6,460 | 26.9 |

50–54 | 894 | 8,610 | 6,580 | 23.6 |

55–59 | 408 | 10,370 | 8,710 | 16.0 |

60+ | 423 | 15,330 | 17,510 | -14.2 |

Total | 42,654 | 14,110 | 10,820 | 23.3 |

#### Debt repayment by ethnic group

While students who identified as either Pacific peoples or European had similar leaving debt in 2003, by 2008 a large difference in repayment progress appeared, as shown in the table below. Leavers who identified as European had repaid the highest proportion of their loan, with 27.6 percent paid off five years after leaving study in 2003, while leavers who identified as Pacific peoples had repaid the smallest proportion of their leaving debt after five years, with 9.4 percent of their leaving debt repaid by 2008.

Average Student Loan Debt by Ethnic GroupFor students who left study in 2003 | ||||

Average debt ($) |
||||

Ethnic group | Number of students who left with debt in 2003 | Leaving debt in 2003 | Five years post-study | Proportion repaid five years post-study |

European | 28,935 | 14,680 | 10,630 | 27.6 |

Māori | 8,763 | 12,640 | 10,850 | 14.2 |

Pacific peoples | 3,804 | 14,870 | 13,470 | 9.4 |

Asian | 4,605 | 14,810 | 12,150 | 18.0 |

Other ethnic groups | 4,257 | 16,440 | 13,170 | 19.9 |

Total | 42,654 | 14,110 | 10,820 | 23.3 |

#### Full repayment of loan

The proportion of students who had fully repaid their loan on leaving study remained steady at 10.9 percent in 2007 compared with 2006. The proportion of students who had fully repaid their loan on leaving study increased from a low of 2.2 percent in 1996 to 12.4 percent in 2005. A slight decrease in students who had fully repaid their loan on leaving study occurred when the interest-free policy for borrowers living in New Zealand began in 2006, although there was no noticeable change in behaviour in 2001 when the zero interest while studying policy was introduced.

Just over one-third of borrowers (35.5 percent or 15,150 of 42,654 borrowers) who left study in 2003 had fully repaid their leaving debt five years later in 2008. This proportion is consistent with borrowers who left study each year between 1996 and 2002. Between 1992 and 1995 the higher percentage of borrowers who had fully repaid their student loan within five years of leaving study was partly due to the number of years available in which people could borrow, as well as the lower course fees in these years. The student loan scheme began in 1992; therefore, those leaving study in the earlier years had fewer years of borrowing to repay than those leaving in later years.

Of the 11,376 students who left study in 1992 with student loan debt, 84.3 percent had fully repaid their student loan by 2008. The proportion of this cohort that had fully repaid their loan increased by between 5 and 10 percent each year until 1998, as seen in the graph below. The proportion that fully repay their student loan debt increases more slowly for the later cohorts shown.

### Income

#### No increase in average income

In 2008, the average income one year post-study did not increase compared with the previous leaving cohort for the first time since 1998, although the average income five years post-study rose 3.8 percent for 2003 leavers compared with 2002 leavers. The average income one year post-study was $30,200 in 2008 for 2007 leavers, the same as the average income in 2007 for 2006 leavers. Average income one year post-study decreased compared with the previous leaving cohort for leavers aged less than 20, 20–24, and 60+, while it increased for all other age groups, as shown in the following graph.

Average income one year post-study for students aged less than 20 decreased from $19,870 for 2006 leavers down to $19,550 for 2007 leavers, while for those aged 20–24 this decreased from $30,140 for 2006 leavers to $29,870 for 2007 leavers. The average income one year after leaving study decreased 12.5 percent for those aged 60+, from $18,470 for 2006 leavers to $16,170 for 2007 leavers.

Note that income information does not distinguish between those who did or did not complete their qualification, nor hours worked.

### Allowances

#### Number of allowance students increases while average amount decreases

The total number of tertiary students receiving an allowance increased 5.1 percent from 61,236 in 2007 to 64,329 in 2008. This is the third consecutive year an increase has occurred since the decreases observed between 2002 and 2005, and likely reflects the adjustments made to the parental income threshold in 2005, 2006, 2007, and 2008. However, the average amount of allowance received decreased slightly for the second year, from $6,580 in 2006 and $6,550 in 2007 to $6,450 in 2008. This decrease occurred due to the increase in the parental income threshold. As more students with parents in the upper portion of the parental income range became eligible, the number of students eligible for small allowance payments increases.

The largest increase in the number of students receiving an allowance was for students aged less than 20 and those aged 20–24, at 1,464 students (9.5 percent) and 1,932 students (9.4 percent) respectively. However, students from these age groups received the lowest amount of allowance ($5,580 and $5,800, respectively) of all age groups. The parental income of students aged 24 years and under determines their eligibility for an allowance.

For students who received both an allowance and a loan, those who received more allowance generally borrowed less; this relationship can be seen in the following graph. In 2008, students who borrowed and received an allowance borrowed an average of $6,390. This amount is 12.5 percent less than the average of $7,190 borrowed by students who had a loan but did not receive an allowance.

For definitions see the glossary in 'Technical notes' of this release.

For technical information contact:

Deborah Jones

Wellington 04 931 4600 **Email**: info@stats.govt.nz

#### Next release ...

*Student Loans and Allowances: 2009 *will be released in December 2010.