Student loan bill passes second reading
The Student Loan Scheme Amendment Bill (No 3), which changes repayment obligations for overseas-based borrowers and tougher measures for persistent non-payers, passed its second reading in Parliament today.
“This legislation continues the Government’s focus on providing fairness to the taxpayer through proper oversight of the student loan scheme,” Revenue Minister Todd McClay says.
“Many overseas-based borrowers are continuing to let the side down with slow repayments and high levels of loan defaults, compared to those who stay in New Zealand and pay off their loans,” Tertiary Education, Skills and Employment Minister Steven Joyce says.
“We have been successful in reducing the cost of the student loan scheme to taxpayers, with the cost of borrowing reducing from around 48 cents in the dollar in 2009 to an estimated 39 cents in the dollar as at 31 March 2013.
“However this still remains higher than we would like. The Government is working to further improve the compliance of overseas-based borrowers by both tightening lending criteria and increasing the speed of repayments.”
The legislation will give IRD additional tools, including seeking an arrest warrant, to deal with overseas-based borrowers who persistently refuse to repay their loans despite having the ability to do so.
“This action will be taken only in the most serious cases of non-compliance and only after Inland Revenue has exhausted all other efforts to persuade the borrower to make repayments,” Mr McClay says.
The bill also proposes to bring overseas-based borrowers’ repayment obligations more into line with their New Zealand-based counterparts by proposing a fixed repayment obligation and increasing the repayment rates for borrowers with loan balances over $45,000.
“A fixed repayment obligation will assist overseas borrowers to pay off their student loan faster and therefore reduce the amount of interest they will have to pay,” Mr McClay says.