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Overseas study

(Clauses 8, 9, 12, 14, 15 and 25)

Summary of proposed amendment

The bill introduces an extension of the interest-free loan entitlement to students engaged in full-time study overseas under a formal exchange programme approved by the New Zealand government, or a formal agreement between a New Zealand education provider and an overseas tertiary education provider. The change corrects an oversight in earlier legislation that disadvantaged certain borrowers studying overseas.

Application date

The change will apply from 1 April 2007.

Key features

Section 38AA of the Student Loan Scheme Act 1992 is being amended to allow a further exemption to the requirement that borrowers reside in New Zealand to qualify for an interest-free loan. New section 38AJA sets out the conditions of the exemption. Borrowers will qualify for the exemption if they are engaged in full-time study overseas under a formal study exchange programme approved by the New Zealand government, or a formal agreement between a New Zealand education provider and an overseas tertiary education. The New Zealand provider must certify that the student is enrolled in full-time study. Providers must also certify that if the studies are successful, they will be credited to a qualification offered by the New Zealand provider that is at level seven or above on the New Zealand Register of Quality Assured Qualifications. Consequential change is being made to sections 38AC, 38AJ, 38AK and 65A of the Student Loan Scheme Act 1992.

Background

Provisions in effect from 1 April 2000 to 31 March 2007 entitled borrowers who were resident in New Zealand for income tax purposes to a full interest write-off if they were engaged in full-time, full-year study. Part-time or part-year students could also qualify if their income was below a certain level. The student's New Zealand tertiary education provider was required to confirm the level of study. As this had the same effect as allowing a loan to be interest-free, when the extension of the exemption to under-graduate study was made, it was considered that these provisions were redundant and they were repealed. There is therefore a gap in interest-free loans for some students who are or were studying overseas from 1 April 2007.