Announcements
PUBLISHED 18 September 2009

Student loan changes to proceed

The government has given the go-ahead to legislation to simplify the administration of student loan repayments, moving from paper-based management of repayments toward electronic management and communication. As a result of consultation in June, the earlier proposal to deduct repayments from students' holiday pay if they earn over $367 a week will not proceed. The changes will be incorporated into a bill to be introduced later this year and, once enacted, are expected to apply from 1 April 2011. For more information see the media release.


Hon Peter Dunne
Minister of Revenue

MEDIA STATEMENT

Dunne: student loan changes to proceed

Cabinet has given the go-ahead to proceed with legislation to simplify the administration of student loan repayments, Revenue Minister Peter Dunne announced today.

The impact of the proposed changes on borrowers was the subject of extensive consultation in June, in which people's views were sought through an online forum and written responses to a government discussion document.

"As a result of hearing a wide range of views, the government has modified one of the main proposals that were presented for consultation a couple of months ago," Mr Dunne said.

"The most controversial change in the original proposals was to deduct loan repayments from students' holiday pay if they earned over $367 a week. Everyone disliked that one - emphatically, and it has now been rejected, which demonstrates that the government does listen.

"Instead, full-time students who earn below $19,084 a year will not have to make student loan repayments while they are studying," Mr Dunne said.

"Nearly everyone agreed with the idea of Inland Revenue moving away from paper-based management of student loan repayments, towards electronic management and communication. That was, in the words of one respondent, a 'no brainer'.

"Borrowers living overseas were particularly keen on having enhanced online services available at any time and from anywhere in the world.

Other main features of the reform are:

  • Borrowers who live in New Zealand and whose income is virtually all from salary and wages will have their repayments deducted from their pay, on a weekly or fortnightly basis, through the PAYE system. For these borrowers there will be no more end-of-year assessments and square-ups.
  • For all borrowers, the late payment penalty, equivalent to 19.56% a year, will be replaced with a late payment interest rate of 10.8% a year for borrowers based overseas, and 6.8% for those living here.
  • There will be less administrative focus on minor over-deductions and under-deductions, to reduce both compliance costs and administrative costs.
  • Borrowers who receive interest, dividends and Maori authority distributions of less than $1500 a year will not have to make repayments on that income.
  • Student loan penalties will be aligned with income tax penalties for greater consistency.

"The changes will be incorporated into a bill to be introduced later this year and are expected to apply from 1 April 2011," Mr Dunne said.

Mark Stewart - Press Secretary, Office of Hon Peter Dunne
Cell +64 21 243 6985