Student loan changes affect income earners

A number of changes to student loans will become effective on April 1, 2012.

If you have a student loan, the new ‘Student Loan Scheme Act 2011’ will make it easier for you to manage your loan and keep on top of your repayments.

If you are a full-time student, you may qualify for a repayment deduction exemption.

If you are earning salary or wages, you must add ‘SL’ to your tax code and make repayments when you earn over the pay period repayment threshold (for example, $367 a week).

The repayments you make through your salary or wage deductions are generally treated as your repayment obligation, unless there is a significant over-or under-deduction.

For most borrowers, this means no longer having a ‘square up’ on your loan at the end of the tax year.

If you are studying full-time, you may qualify for an exemption from repayment deductions, as detailed below.

If you have a significant over-deduction on your student loan, you can ask us for a refund or put the extra repayment towards your loan.

If there is a significant under-deduction, we will ask you and your employer to make additional deductions from your salary or wage to catch up with this under-deduction.

Voluntary repayments

If you want to pay off your loan faster, you can make extra repayments whenever you want. You can pay us directly by setting up automatic payments or through direct credit.

You can also ask your employer to make extra deductions from your salary or wages on top of your standard student loan deductions; but make sure that your employer properly identifies the extra deductions.

You may qualify for a 10% voluntary repayment bonus if you are up-to-date with your obligations, your loan balance with Inland Revenue (IR) is $550 or more at the start of the tax year and your voluntary repayments total $500 or more.

If you are studying full-time and working, you can apply for a ‘Repayment Deduction Exemption’ (RDE) if you expect to earn less than the annual repayment threshold ($19,084) over the coming year, even if you earn more than $367 a week from time to time.

If you are in this situation, you can apply for an exemption through our online services from March 2012, provided you have an online account.

We will send you an RDE certificate for you to present to your employer.

If you have more than one job, you can apply for a Special Deduction Rate (SDR) for your secondary job/s if you expect to earn less than $367 a week from the main job. You must review your estimated earnings every quarter.

You can apply for the reduced rate through our online services from March 2012. We will send you an SDR certificate for you to present to your employer.

Loan balance

From April 2012, borrowers who have transactions with both IR and ‘StudyLink’ will see a complete and up-to-date view of their loan balance through the secure online services of IR, because StudyLink will be transferring loan account information to us on a daily basis.

This means the statements that you would receive from us will also include your StudyLink transactions so that, whether it is online or on paper, you will see your total loan balance every time.

Admin fee

An annual administration fee of $40 will be charged to your account if your loan balance with us is $20 or more, unless you have paid StudyLink an establishment fee in the same tax year.

If you would like to know more about student loans and the upcoming changes, please visit www.ird.govt.nz/studentloans

Free Seminars

If you are in business, you may like to attend one of our free tax seminars or workshops held in various parts of the country.

Visit www.ird.govt.nz and enter the search term “Seminars.”

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

Read related story, Easing the overdue tax burden in Businesslink.