Overview

The Student Loan Scheme Amendment Bill (No. 3) introduces changes announced in Budget 2013. The bill introduces two major changes:

• Proposals to enable Inland Revenue to request an arrest warrant for borrowers who persistently default on their student loan obligations and attempt to leave the country. This power will send a strong signal to borrowers that non-compliance is unacceptable and create a strong sanction for persistent defaulters.
• Amendments to speed up repayments from compliant overseas-based borrowers. It achieves this through fixed repayment obligations for overseas-based borrowers and by adding two new thresholds to the overseas-based borrower repayment rules.

Matters raised in submissions

Five submissions were made on the bill.

Four of the submitters objected to the arrest at border provision. As reasons for opposing the provision, submitters generally cited the severity of the power, saying that it would reduce the incentives for borrowers to return to New Zealand and how resources could be better used.

The New Zealand Law Society submission proposed technical amendments to the arrest at border provision but made no comment on the provision generally.

The National Council of Women said there should be a gender impact analysis of the proposed amendments. It also raised privacy concerns with clause 11 of the bill relating to sharing contact information, saying that sharing information about borrowers not in default is undeserved.

The New Zealand Union of Students’ Associations (NZUSA) submitted that the overseas-based borrower repayment rules should be income-based. It also submitted that there should be broader powers for Inland Revenue to write off interest and that provisions relating to a borrower’s contact person should be tightened to avoid harassment.

Three submissions referred to matters not covered by the bill, mainly about the valuation of the student loan scheme, parental responsibility for tertiary education and the student support package as a whole.

Matters raised by officials

The bill contains clauses that align the definition of “income” for student loans with that used for Working for Families. Recent tax bills have proposed changes to the definition of “income” for Working for Families. To provide consistency in the definition for social policy purposes, officials recommend amending the bill to align the definition of “income” in student loans with changes proposed for Working for Families.

Since introduction of the bill, officials have identified a small error in the drafting of the definition of “relevant loan balance” in clause 6 of the bill that would result in the provision not working as intended. Officials propose that an amendment be made to correct this error.

Matters raised by the Finance and Expenditure Committee

Clause 162B(2D) of the bill sets out that the courts may make “any other order the court thinks fit” in relation to an arrested student loan borrower. The Committee submitted that the provision had wide scope and that there was a lack of clarity around what orders could potentially be made. As a result, officials propose this order be replaced with two provisions allowing the court to make orders that the borrower provide information or enter a payment arrangement with Inland Revenue.

The Committee also asked officials for the specific criteria that would be used by Inland Revenue to request an arrest warrant for a borrower in default.