With approximately 621,000 borrowers with a loan balance with Inland Revenue for collection, and a total nominal loan balance of approximately $12.07 billion, the student loan scheme is a significant Crown asset and a major financial commitment by Government towards supporting those in tertiary education. As such, it is important that the scheme is managed as efficiently as possible and that borrowers comply with their repayment obligations upon completion of their studies.
The student loan package announced in Budget 2011 focused on improving the value and fairness of the student loan scheme and encouraging personal responsibility for loan repayments. The changes proposed in this bill bring into effect those decisions.
The bill provides for Inland Revenue to receive details of a borrower’s contact person from the loan manager (StudyLink). Every new loan application must include a contact person as a condition of accessing a student loan. When a borrower is in default and cannot be contacted, Inland Revenue will be able to talk to the contact person to try and locate the borrower.
In the interests of fairness across the student loan scheme, and to maximise repayments from New Zealand-based borrowers, the bill makes amendments to exclude losses from the calculation of “net income”. The ability to offset losses against net income can reduce their liability for student loan repayment purposes.
As a consequence of this policy, the bill also includes amendments to extend the pay-period assessment policy to all salary and wage earnings.
Finally, the bill makes a number of amendments to the “repayment holiday” rules to improve repayments from overseas-based borrowers. Under the changes proposed, the repayment “holiday” whereby borrowers can take a break from their repayment obligations while they are overseas will be reduced from three years to one year. Borrowers will also have to apply for a repayment holiday, up to six months from their date of departure from New Zealand, and specify a New Zealand-based contact person.