Hon Peter Dunne
Minister of Revenue

7 September 2011

Dunne: student loan ‘contact person’ to become law

Revenue Minister Peter Dunne has tabled new student loan legislation in Parliament to make it mandatory to provide a New Zealand-based contact person when applying for repayment holidays, which will also be cut from three years to one year for those travelling overseas.

The Student Loan Scheme Amendment Bill introduced in Parliament today contains reforms announced in Budget 2011 and follows on from the Student Loan Scheme Act passed by Parliament last month which allows for defaulters’ loans to be recalled in full.

The Student Loans Budget package included a change requiring every new loan application received by StudyLink to include a contact person as a condition of getting a student loan. This bill will allow for that contact information to be provided to Inland Revenue by StudyLink.

“Essentially, we are cleaning up the whole area around defaulting on student loans and addressing the overall size of student loan debt,” Mr Dunne said.

“This latest bill contains a range of amendments designed to improve the rate of repayments,” he said.

The key features include:

• Providing for Inland Revenue to receive details of a borrower’s contact person from StudyLink, which manages student loans applications. Every new loan application must include a contact person as a condition of accessing a student loan.
• excluding losses from the calculation of income for student loan repayment purposes
• reducing the repayment holiday from three years to one
• requiring borrowers to apply for their repayment holiday and provide a contact person when they do so.

“New Zealand’s student loan scheme is one of the more generous ones internationally, but this comes at a real cost to taxpayers.

“These changes will make the scheme fairer for taxpayers as well as for the vast majority of loan borrowers who do the right thing,” he said.

Mr Dunne said the move towards Inland Revenue and StudyLink having access to a compulsory contact person when taking out a student loan would counter the problems that have occurred where students head off overseas and are lost track of, making it difficult to enforce repayment.

Inland Revenue currently holds overseas addresses for less than a quarter of the estimated 91,000 overseas-based borrowers. In addition to this, it also holds details for nominated people for some overseas-based borrowers.

“When Inland Revenue has a contact person for a borrower – probably in most cases a close relative – there can be a useful reminder from home that this debt is still there and needs to be met, and there are some pretty clear ramifications if you do not,” he said.

“It also gives Inland Revenue a clearer line for making contact with borrowers.”

Mr Dunne said reducing the repayment holiday for those travelling overseas from three years to one year was because three years has been perhaps overly generous and not useful in signalling to people that they still have an obligation to repay their loans, no matter where they are.

“By years two and three of their travels it is reasonable to assume people are earning income somewhere around the world, so it is equally reasonable to expect that they can resume their loan obligations,” he said.

Full details of the bills are available on Inland Revenue’s tax policy website www.taxpolicy.ird.govt.nz

ENDS

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