A business think-tank is backing a Productivity Commission recommendation to put interest back on student loans.
A Commission report released this morning says the present tertiary education model needs a shake up.
Recommendations in the 400 page draft include adding interest to student loans, different forms of funding, and scrapping the University Entrance certificate.
New Zealand Initiative Executive Director Oliver Hartwich said all their studies show that since zero interest loans were brought in, it hasn't increased the uptake of tertiary courses.
He said by reducing the interest to zero New Zealand has incurred costs of about $600 million a year, and it would work better if we targeted it to those who really need it.
He said it's unfair to spend that money on students who may actually be able to afford paying back interest when others are struggling financially.
Mr Hartwich said almost no other country has zero interest on student loans across the board.
The idea for students to save instead of borrow for tertiary education also piqued the think-tank's interest.
Commission Chair Murray Sherwin told Newstalk ZB a 'Student Education Account' could be created and would begin when the student turns 16, and could save around $45,000.
Instead of getting into debt with universities, interest would be paid to students on these accounts.
Mr Hartwich said depending on where the interest is coming from, it could be a great move,
"It is not an entirely new idea there are countries around the world that have experimented in the past with a variety of individual accounts.
I think it's an interesting concept to think about and we have to thank the Productivity Commission for yet another insightful report."
The business community is also impressed.
Business New Zealand says if the proposed re-modelling of the tertiary system in the report goes ahead, the New Zealand economy would reap the benefits.
CEO Kirk Hope said the funding models proposed would make it easier for students to move across disciplines and institutions whether they be public, private, universities or polytechnics.
"So that enables the tertiary education system to deliver skills for any student that business needs in order to grow the economy."
Mr Hope said the recommended model would also bring qualifications up to a similar standard at all tertiary providers.
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