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1 April marks new era for student loans

Hon Dr Michael Cullen
Minister for Tertiary Education

29 March 2006 Media Statement

1 April marks new era for student loans


From 1 April no further interest will be charged on student loans for those who live in New Zealand, said Minister for Tertiary Education Dr Michael Cullen today

Students who borrow from that date will only have to repay what they borrow. Those with existing loans will not be charged any further interest.

"No more will students and graduates be burdened with the compounding cost of interest provided they remain in New Zealand. This will save them thousands of dollars in many cases, and knock years off repayment times,” Dr Cullen said.

The change continues the government's progress in making tertiary education more affordable.

"We recognise that tertiary education is vital. Students and graduates need more support if we are to produce the highly skilled workforce needed to drive the transformation of New Zealand into a high wage, knowledge-based economy."

Those with student loans who travel overseas to work will still have to pay interest. "The change is designed to encourage them to stay in New Zealand or to return more quickly to contribute to our economy and society,'' said Dr Cullen.

Note: Dr Cullen and other Labour MPs will today be celebrating interest free student loans at Victoria University's quad 12.30pm to 1.15pm.

ENDS

For more information:
http://www.ird.govt.nz/studentloans

Background

- The Student Loan Scheme Amendment Act 2005 was passed on 21 December 2005 and comes into effect on 1 April.

- Interest free loans will be delivered by an interest write-off. This means interest will still be charged and appear on statements. However, if a borrower is eligible, this interest will be written off after the end of the tax year (31 March).

- Only the interest charged after 1 April 2006 will be written off under interest free student loans. The new legislation does not cover interest charged before this time.

- The first interest write-offs will happen in April 2007.

Eligibility

- To be eligible, student loan borrowers - whether they are still studying or not - need to be living in New Zealand for 183 or more consecutive days (about six months).

- Borrowers who live overseas are not eligible for interest free student loans unless they are granted an exemption (see below for details).

- Borrowers who have met the 183-day requirement, then leave New Zealand for 184 or more consecutive days, will lose their eligibility. This means interest charged from the day after they leave New Zealand will not be written off.

- Borrowers living overseas, who then return to New Zealand, will become eligible for an interest free student loan once they have been back for 183 or more consecutive days (about six months). This means the interest charged from the date they return will be written off.

What do borrowers need to do?

- Eligible borrowers don’t need to do anything to get their interest written off. All interest charged from 1 April 2006 will be written off automatically.

- Borrowers must advise Inland Revenue if they are planning on leaving New Zealand for three months, and when they get back. They also need to provide any other information required to determine their eligibility to an interest free student loan.

Exemptions

- A borrower needs to apply to Inland Revenue for an exemption. An exemption may be granted if the borrower, for example, is:
- studying full-time at post-graduate level overseas
- working abroad for the New Zealand Government
- absent due to employment or occupation
- a volunteer working overseas
- has an unexpected delay returning to New Zealand.

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