Matters raised in submissions


PROVIDING ALTERNATIVE CONTACT DETAILS

Clause 7

Submission

(National Council of Women)

The bill does not require borrowers to supply details of a contact person as a prerequisite to accessing a loan, so there is still potential for losing contact with borrowers.

Comment

The Ministry of Social Development, through its StudyLink service, provides information on student loan entitlements, assesses applications for student support and makes student loan payments. Inland Revenue manages the collection of loan repayments through the tax system and this is governed by the Student Loan Scheme Act 2011.

Loan eligibility is assessed by StudyLink and is authorised in cabinet minutes. As a condition of accessing a student loan, StudyLink will require the borrower to provide alternative contact details. The proposed amendments contained in this bill allow those details provided to the loan manager (StudyLink) to be received and used by Inland Revenue once the loan is transferred.

Recommendation

That the submission be noted.


USE OF ALTERNATIVE CONTACT DETAILS

Clause 29

Submission

(National Council of Women)

A contact person’s rights and duties should be clearly defined, so as not to find themselves inadvertently liable for another’s debt. The “contact person” should be just that – and have no other responsibilities.

The administration fee could escalate and interest might then be charged on it.

Comment

Clause 29 inserts new section 193A authorising the Commissioner to request a borrower’s contact person to assist where the borrower is in default and cannot be located. The Commissioner may only request the contact person to:

  • provide the borrower’s address details; or
  • ask the borrower to contact Inland Revenue.

There is no ability for the contact person to inadvertently be liable for the borrower’s student loan debt.

Currently, the bill prescribes that Inland Revenue may only communicate with the contact person when the borrower is in default. As noted below, officials recommend that Inland Revenue be given the ability to pro-actively communicate with the contact person to notify the individual that they have been nominated and to explain what is required of a contact person if and when Inland Revenue contacts them. This ability will assist in ensuring the contact person understands that they will only be called upon for very specific information.

This change is not expected to increase the administration fee.

Recommendation

That the submission be noted.


EXCLUDING LOSSES FROM THE CALCULATION OF INCOME FOR STUDENT LOAN REPAYMENT PURPOSES

Clauses 8–16

Submissions

(National Council of Women, Lenore Bamfield)

Women often cluster in small business enterprises, and the move to exclude business losses in calculating liable income may stifle entrepreneurship or contribute unnecessarily to small business failure. Women may therefore be more disadvantaged by this change. (National Council of Women)

The proposal to remove business and investment losses from the assessment base of New Zealand-based borrowers’ student loan repayment obligations should not proceed. (Lenore Bamfield)

Comment

Amendments in the bill exclude investment and business losses, such as rental losses, from the calculation of net income for student loan repayment purposes. The purpose of the amendment is to maximise repayments from New Zealand-based borrowers and ensure fairness across the student loan scheme.

The policy rationale is that although such losses may reduce an individual’s economic income, the Government should not provide for the ability to gain a student loan repayment benefit as a consequence of offsetting those losses against income. In addition, denying the ability to offset both business and investment losses is consistent with other social assistance programmes – for example, claiming Working for Families’ tax credits.

Recommendation

That the submissions be declined.


APPLYING FOR THE REPAYMENT HOLIDAY

Clause 17

Submissions

(National Council of Women, Lenore Bamfield)

Requiring a borrower to apply for the repayment holiday, and to supply details of a contact person in New Zealand as part of the application, is long overdue. However, there is concern expressed by the Ministry of Education that reducing the time of the repayment holiday will not be effective in encouraging repayments, and could even have the opposite effect. Shortening the repayment holiday may delay the return of some borrowers.

The three-year repayment holiday should be retained but tailored to each borrower’s circumstances.

Comment

Officials acknowledge that there are uncertainties when anticipating behavioural responses to policy change. However officials note that recent research undertaken by the KEA Foundation surveyed 15,600 New Zealanders living abroad and asked participants about the factors that influence their decision to live overseas.[1]

The survey found that economic factors were the primary factor, followed by family and lifestyle considerations. Student loan debt was not raised as a factor. Inland Revenue’s own research conducted in 2011 corroborates these findings.

For borrowers who do not meet their obligations, the reduction in the repayment holiday will likely increase their indebtedness. However officials do not believe that the reduction will lead to more borrowers defaulting on their obligations.

The current automatic three-year holiday is generous and can result in borrowers not resuming repayments when the repayment holiday comes to an end. The application process, combined with the requirement to supply a New Zealand-based contact person, seeks to address this behaviour and signals to borrowers the importance of repaying their loan when the repayment holiday comes to an end.

To the extent that borrowers can still choose whether or not to apply for a repayment holiday, the policy allows an element of tailoring to suit a borrower’s individual financial situation.

Recommendation

That the submissions be declined.


OVERSEAS-BASED REPAYMENT OBLIGATION

Submission

(Lenore Bamfield)

The repayment obligation for overseas-based borrowers should be set at levels to ensure that:

  • the amount that overseas-based borrowers are required to pay is fair compared with what New Zealand-based borrowers are required to pay; and
  • the loan is repaid in a reasonable timeframe.

Comment

The bill does not change the policy on the calculation of the repayment obligation for overseas-based borrowers; therefore the submission is outside the scope of the bill.

Recommendation

That the submission be declined.

 

1A copy of the research is available at:
http://www.keanewzealand.com/sites/default/files/Every_Kiwi_Counts_2011_Kea_NZ_final.pdf