"The money for loan repayments has to come from somewhere... It is money which is not being spent elsewhere."
Recently, someone described the size of the national student loan balance - now just under $11.5 billion - as a tragedy, Prof Hansen said.
However, Prof Hansen, who has a particular interest in the economics of education, said he did not agree.
"It's not a tragedy at all. It's a sign that the loan scheme is working. It means people are able to finance a tertiary education."
The question was whether everyone who accessed loans should do so, he said.
"It breaks my heart seeing people running up debts which have consequences on their lives when they are not getting an education worth anything."
Asked what he termed an education worth having, he said it was one which, in economists' jargon, "contributed to people's human capital" by making them more employable or ensuring they secured a good job with a satisfactory salary.
"Education is an investment, after all."
He advised intending students to think seriously about why they wanted to pursue tertiary study and to realise borrowing to finance it was a long-term commitment.
Although the introduction of interest-free loans was obviously hugely beneficial to students, it was likely to discourage students from repaying their loans quickly, Prof Hansen said.
"When it is interest-free you lose the urgency. Why would you pay it back quickly? It's the cheapest money you'll ever get. You would do everything to avoid paying it back."
Ministry of Education figures do not support that theory, so far at least.
Since 2006, the rate of repayments has increased substantially, topping $619 million in the 2009-10 financial year.
But the number of people making little or no progress in paying off their loans has remained constant.
About 12% of 1992 borrowers have not yet repaid their loans in full, while an analysis of borrowers who left study in 2000 showed 42% had completely repaid their loans, 25% had repaid some and 33% had repaid nothing.
Borrowers making little or no progress in paying off their loans are equally likely to be men or women.
They are more likely to have dropped out without completing a qualification, more likely to have studied for a lower-level qualification such as a certificate or diploma rather than a degree and are more likely to be Maori or Pacific Islanders.
With the national student loan balance continuing to grow, the "golden question" was how high a balance the Government could carry before making significant repayment changes, Prof Hansen said.
"Only a government could back a scheme like this - no private banker could do it. Students are a bad credit risk. They have no collateral. If they don't repay their loans, what are you going to do - take back their mobile phones?"
At the very least, the Government should be charging a CPI-linked inflation adjustment, a move which would protect the true value of the money students had borrowed, he said.
But it would be difficult politically to impose any interest again, as it was a potential vote loser, he said.
"It definitely won't happen this [present Government] term. Maybe next term though."
