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Inland Revenue

Tax Policy

PUBLISHED 24 February 2005

Student loan interest rate unchanged

The student loan interest rate will stay at 7% for the year beginning 1 April 2005. The base interest rate component will be set at 4.2% and the interest adjustment rate component at 2.8%. For more information see the government's media statement.

Hon David Cunliffe
Associate Minister of Revenue


Student loan interest rate unchanged

The student loan interest rate will stay at 7 percent for the year beginning 1 April 2005, Associate Revenue Minister David Cunliffe announced today.

The 7 percent rate consists of two parts: the base interest rate, which drops from 5.5 percent to 4.2 percent for the coming year, and the interest adjustment rate, which rises from 1.5 percent to 2.8 percent.

"Most borrowers, however, do not pay the full interest rate on their loans," Mr Cunliffe said.

For the year ended March 2004 about two-thirds of borrowers received some kind of interest write-off. Tertiary students have been saved more than $250 million in waived interest charges since the introduction of the Labour-led government's interest write off policy in 2000.

"All full-time, full-year students and part-time, low-income students will continue to qualify for a full interest write-off while they are studying.

"Borrowers who are no longer students and whose income is under the current repayment threshold of $16,172 have all their base interest written off, while those on higher incomes have their base interest capped at 50 percent of their compulsory repayment obligation," they said.

The interest adjustment rate is based on the Consumer Price Index for the December 2004 quarter and reflects the increase in the CPI between that and the December 2003 quarter.

The rate for the year beginning 1 April 2005 was set by Order in Council on Monday 21 February.

Contact: Julian Kersey, Advisor, 04 471 9116, 021 811 999, [email protected]