The Government has ushered in changes to the Student Loans Scheme to make borrowers more responsible, improve the effectiveness of the benefits extended and ensure a better repayment system, two Ministers of the Crown have said.
Tertiary Education Minister Steven Joyce and Revenue Minister Peter Dunne said in a statement issued on July 18 that the changes introduced in Budget 2011 were also aimed at getting better value for taxpayers.
Mr Dunne said the interest-free scheme returned only 55 cents to the dollar in today’s terms.
The Government had advanced about $1.58 billion in student loans during the fiscal year 2010-2011, he said.
According to Mr Joyce, the savings accrued from the new measures 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.
The initiatives announced on July 18 included restricting student loan eligibility for those with an overdue student loan repayment obligation of $500 or more and those defaulting repayment for more than one year.
The new scheme also restricts borrowing for people aged 55 and over to tuition fees only. It removes the entitlement for part-time full-year students to borrow for course-related costs.
“Holding the student loan repayment threshold at $19,084 until April 1, 2015 and requiring every new loan application to include a contact person as one of the conditions of accessing a student loan,” are also among the new features.
Mr Dunne said it was essential to shorten the repayment holiday for overseas-based borrowers from three years to one year.
“Borrowers going overseas should apply for the repayment holiday and provide a New Zealand-based contact person,” he said.
The Ministers believe that the Student Loan Scheme should improve fairness for New Zealand-based borrowers by broadening the definition of income for repayment purposes and investigating other options to enlarge the definition of income in the future.
The changes also envisage extension of exemption to the two-year student loan and allowance stand-down for permanent residents and Australians. This would 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 said.
Mr Joyce said the student support changes would limit lending to borrowers who are less likely to repay their loans, while ensuring that all borrowers meet their repayment obligations.
“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. But we need to ensure that borrowers understand their choice to access the scheme and all the accompanying responsibilities,” he said.