Measures to reform the student support system in Budget 2010 will improve accountability of the tertiary sector and boost educational performance, Tertiary Education Minister Steven Joyce says.

The interest-free nature of the student loan scheme means that every dollar lent today is worth only around 53 cents in 2010 dollar terms. In 2009/10, the Government will lend out about $1.54 billion in student loans.

 "While we are committed to interest-free student loans, it is important we are fair to taxpayers and remove any perverse incentives from the scheme as it stands," Mr Joyce says.

"The changes we are making will encourage better results and give taxpayers a better return on their investment in the education of our tertiary students."

The package of measures will also help students avoid �double jeopardy' - where they can incur high levels of debt without gaining a qualification and the resulting higher-paying job that helps them pay the debt off.

Key initiatives announced as part of Budget 2010 include:

• Focusing students on performance, by requiring them to pass more than 50 per cent of their full-time courses over two years to be able to keep borrowing from the scheme.
• Introducing a lifetime limit on access to student loans - being seven years for an undergraduate degree (seven equivalent full time study units).
• Preventing permanent residents and Australians from accessing a student loan until they have lived in New Zealand for at least two years.
• Increasing the StudyLink student loan administration fee from $50 to $60 and introducing a new $40 annual account fee which applies once study is completed to cover more of the actual costs of administration over the life of the loan.
• Replacing the fee maxima with an Annual Maximum Fee Movement, which caps fee increases for all courses at 4 per cent in 2011.

The package will support students who make the most of their educational opportunities, Mr Joyce says.

"When students take out a student loan, but fail to gain a qualification, they incur costs for themselves and for the Government without any real gain.

"That's why it's important that students are asked to meet academic performance standards to retain access to student support.

"In addition, I want students coming into the country to show a commitment to New Zealand before they access this generous, taxpayer funded scheme." 

The change for new permanent residents and Australians will bring the student loan scheme into line with the benefit system and moves it closer to the way Australia approaches student support for Kiwi students.

"These measures strike a fairer balance between supporting students and respect for taxpayers that supply that support. And we are reinvesting the money saved back into more places for more students."