Bonus on student loan repayment

Do you have a student loan? Like many borrowers, you may be trying to repay the loan as quickly as possible. We offer 10% voluntary repayment bonus that may encourage you to become debt-free sooner.

A borrower who makes voluntary repayments of $500 or more during a tax year (April 1 to March 31) will be entitled to a bonus towards his or her student loan. The bonus is 10% of the total voluntary repayments made.

Voluntary repayments are payments that you make on top of what you need to repay for the tax year. Such payments need not be a lump sum.

You would still be eligible for bonus as long as the total voluntary payments are $500 or more during the tax year.

If you pay $10 extra a week (about the cost of two cups of coffee), you could get $50 off your loan at the end of the year.

Here is an example:

Lisa has a student loan of $30,000, with an annual repayment obligation of $3000.

During the tax year April 1, 2009 to March 31, 2010, she pays $3000 out of her salary. She also sets up an automatic weekly payment of $30 from her bank account. By March 31, 2010, such voluntary payments would total $1560.

Lisa would get a voluntary repayment bonus of $156.

You do not have to apply for the bonus. We will credit the bonus amount into your student loan account if you qualify at the end of the tax year and send you a statement.

For more information about the voluntary repayment bonus and student loans in general, visit www.ird.govt.nz/studentloans.

You may like to sign up for our ‘Notify Me’ Service. We will send you emails with general student loan information that will help you manage your loan.

You will also find the student loan repayment calculator on the website, and understand how your payments changing circumstances (such as going overseas) could affect your loan and the interest charged.

I suggest that you seek appropriate financial advice before making financial decisions and taking advantage of our voluntary repayment bonus.

Abdul Rafik is Inland Revenue’s Community Relationships Advisor based in Auckland. He is happy to answer readers’ queries, which should be sent to venkat@indiannewslink.co.nz

The Inland Revenue Department conducts regular taxation seminars and workshops in North Shore and Waitakere Cities. Please visit www.ird.govt.nz to register.

*

Student Loans- Some Highlights

Of students enrolled in 2008, 37.5% borrowed for study and allowances, an increase from 34.7% in 2007. 

The average student loan leaving debt reached a high of $14,980 in 2007, up from $14,620 in 2006.

The number of students aged 60+ who left study with debt more than doubled from 960 students in 2006 to 2136 in 2007. Their leaving debt also increased 60.3% from $13,720 in 2006 to $22,000 in 2007.

The average income one year after leaving study was $30,200 for those who left study in 2007, the same as the average income in 2007 for those who left study in 2006. This was the first time since 1998 that average income had not increased from one leaving cohort to another. 

The average income one year after leaving study for leavers aged less than 20 decreased from $19,870 (2006 leavers) to $19,550 (2007 leavers). For leavers aged 20–24, their average income one year after leaving study decreased from $30,140 (2006 leavers) to $29,870 (2007 leavers).

Source: Study Link and Statistics New Zealand