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.
Tertiary Education, Skills and Employment Minister, Steven Joyce, claims many overseas-based borrowers are continuing to ‘let the side down’ with slow repayments and high levels of loan defaults compared to their New Zealand-based peers.
“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 is still a higher figure than the current government would like, he said.
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,” said Revenue Minister, Todd McClay.
The bill also proposes to bring overseas-based borrowers’ repayment obligations more in 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,” said McClay.