New Rules for Student Loans

08 September 2011 - Which Way to Pay

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New Rules for Student Loans

Parliament has witnessed the tabling of new legislation regarding the repayment of student loans. The new plans aim to improve the rate of repayment on student loans taken out in New Zealand.

Yesterday, Revenue Minister Peter Dunne introduced the Student Loan Scheme Amendment Bill to Parliament which primarily aims to tighten the rules applicable for student loan holders. If the legislation is accepted, there will be a cut down upon the repayment holidays available to borrowers who are travelling overseas. In a similar vein, borrowers who leave the country will be required to nominate a contact person in further measures to reduce the number of borrowers defaulting on payment.

Peter Bill clarified the intentions of the bill by saying: “…essentially, we are cleaning up the whole area around defaulting on student loans and addressing the overall size of student loan debt.”

As such, the new legislation would rid borrowers of a loan repayment holiday which at present is automatically received to those who leave the country for an extended period of time. That said, a student loan repayment holiday is still available under the new bill, but requires an application and as such approval. Borrowers who are already based overseas will also find that their repayment holiday time limit will be reduced from three years to one year. Peter Dunne said that once a person has lived overseas for more than two years, it is reasonable to assume that they have found paid employment.

Another key part of the legislation is the requirement of borrowers to nominate a contact person to Inland Revenue Department (IRD) as a mechanism of loan security.

The passing of the bill will also see the exclusion of losses from the calculation of annual incomes, for the purposes of student loan repayments.

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