Overpayments of student loan repayments

Clause 111

Submissions

(Lenore Bamfield, NZ Union of Students’ Associations)

The bill precludes borrowers with other income from receiving a refund of overpaid deductions from salary or wage income.

Secondly, overpayments can automatically be credited to any outstanding student loan accounts that a borrower has.

Comment

Overpaid salary and wage deductions

The bill provides for borrowers who receive other income (regardless of whether they also receive salary or wage income as well) to square-up their repayment liability at the end of the year. Any overpayment (from whatever source) will be an excess repayment and available for refunding. The submission has identified a legislative oversight in clause 111 whereby a borrower who receives both other income and salary or wages is unable to receive a refund of overpaid loan deductions on their salary or wage income.

Officials agree this is an oversight and that clause 111 should be amended to enable other income earners to receive a refund of overpaid deductions from their salary or wage income.

Recommendation

That the submission be accepted.

Offsetting of refunds against outstanding debt

The NZ Union of Students’ Associations had concerns regarding Inland Revenue’s ability to automatically credit any overpaid student loan payment to satisfy an unpaid amount, rather than the borrower retaining the current system of enabling the borrower to choose whether to receive the refund.

However, the current system automatically assigns any student loan payment received to repay any unpaid amounts. This is to the borrower’s advantage as it reduces the borrower’s exposure to late payment penalties imposed on any unpaid amounts.

When all unpaid amounts have been cleared, any remaining overpayment is assigned to repay the loan balance and the borrower is advised that they can elect to have this amount refunded if they wish. This process is continued in the bill when there is a significant overpayment.

Recommendation

That the submission be declined.