Well, it's still a subsidy, it's just much less of one than completely free tuition would be. If the Government wasn't loaning that money interest-free, it cou

Well, it's still a subsidy, it's just much less of one than completely free tuition would be. If the Government wasn't loaning that money interest-free, it could in principle reduce its issued bonds by that amount, so the subsidy is the value of the bond rate faced by the NZ Government - plus the present value of the expected defaults. The idea of linking repayment to income is called an "income-contingent loan". It's a great idea for University tuition, because it reduces the loan to a system for reclaiming a proportion of the private benefits that accrue to the student from the additional education. This removes some of the risk faced by the student that they might put a lot of resources into education but then fail to realise the expected benefits (eg. through serious illness, a broader economic collapse etc).