Slow repayers: the characteristics of borrowers who make slow progress in reducing their student loans

Slow repayment of student loans means people hold loans for extended periods, resulting in higher costs to the government. Understanding the characteristics of the people who are likely to repay slowly provides information that can help shape policy on the student support system. This report looks at people who used the Student Loan Scheme (SLS) and left tertiary study between 2000 and 2006, and focuses on those who make slow progress towards repaying their loans. It focuses on four cohorts of student loan borrowers, divided into two categories: (1) borrowers who left study in 2000, 2002 or 2004, before the introduction of interest-free loans for all New Zealand-based borrowers from April 2006; and (2) borrowers who left study in 2006, following the introduction of the interest-free student loans policy. It profiles those borrowers who made little or no progress in reducing their loans post-study. It also looks at the characteristics of borrowers who were always New-Zealand-based after leaving study in 2006, and whose income was consistently below the student loan repayment threshold over the next three years. Slow repayers are more likely to: be over 50 years old during their last study year; have studied below degree level; have failed to complete a qualification; have studied in fields where lower level courses were predominant, such as food and hospitality, society and culture, or creative arts; and be Maori or Pasifika. Borrowers who were overseas-based for a period after study were much more likely to be slow in repaying, compared with those New Zealand-based borrowers. The study also looked at New Zealand-based borrowers who were below the income threshold for student loan repayments for the first three years after leaving tertiary study. They were broadly associated with many of the same characteristics as the slow repayers in 2006.