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Student loans – better value for taxpayers

Hon Steven Joyce
Minister for Tertiary Education
Hon Peter Dunne
Minister of Revenue
19 May 2011

Student loans – better value for taxpayers

Encouraging personal responsibility and getting better value for taxpayers are key features of Budget 2011 changes to the student loan scheme, Tertiary Education Minister Steven Joyce and Revenue Minister Peter Dunne say.

The interest-free nature of the student loan scheme means that every dollar lent out today is worth only around 55 cents in today’s dollars. In 2010/11, the Government will lend out about $1.58 billion in student loans.

“The savings from the measures announced today will be used to provide funding for new tertiary education initiatives and investment in the Government’s other priorities to boost the country’s economic recovery,” Mr Joyce says.

Key student support initiatives announced today include:

• Restricting student loan eligibility for those with an overdue student loan repayment obligation of $500 or more who are in default for more than one year.

• Restricting borrowing for people aged 55 and over to tuition fees only.

• Removing the entitlement for part-time full-year students to borrow for course-related costs.

• Holding the student loan repayment threshold at $19,084 until 1 April 2015.

• Requiring every new loan application to include a contact person as one of the conditions of accessing a student loan.

• Shortening the repayment holiday for overseas-based borrowers from three years to one year, and requiring borrowers to apply for the repayment holiday and provide a New Zealand-based contact person before they go overseas.

• Improving fairness for New Zealand-based borrowers by beginning to broaden the definition of income for student loan repayment purposes, and investigating other options to further broaden the definition of income in the future.

• Extending the exemption to the two-year student loan and allowance stand-down for permanent residents and Australians to include the sponsored family members of protected persons.

“Changes to the repayment holiday provisions signal greater accountability for overseas-based borrowers on their student loans. Regardless of where they go overseas, borrowers must provide a contact person and begin repaying their loan once their holiday ends,” Mr Dunne says.

Mr Joyce says the student support changes will limit lending to borrowers who are less likely to repay their loans, while also ensuring that all borrowers who have repayment obligations are meeting them.

“The student loan scheme still remains one of the most generous in the world, offering interest-free loans for all borrowers who remain in New Zealand.

“We need to ensure that borrowers understand that when they choose to access the loan scheme, they are also choosing to take on all the responsibilities that come with it.”


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