25th
Student Loans May Bite Early
University students working in their summer holidays could be forced to make student loan repayments under a proposed change to the scheme.
The change would hurt those already scrimping to get through university, student representatives warn.
The move is one of a raft of Inland Revenue Department initiatives designed to simplify the management of loan repayments and expected to cost $30 million over the next three years.
The proposal would see the threshold at which people must begin loan repayments changed from an annual figure to one based on a weekly, fortnightly or monthly pay-cycle, depending on when a person is paid.
Currently, those with a student loan who earn over $19,084 a year must make repayments.
Under the proposed changes and based on the current annual threshold, borrowers paid weekly and earning over $367 a week would have to make repayments.
Victoria University student president Jasmine Freemantle said students should not be expected to repay their loans when they were still studying.
“It’s going to have a negative impact on students who may work longer hours over summer and during other non-teaching periods in order to generate enough money to survive.”
Students adjusted their working hours to suit their workloads. Many worked 50-hour weeks when they were less busy, such as in study-breaks, and during these times would likely be earning more than $367 a week, she said.
“This change is going to penalise students for undertaking additional employment.”
New Zealand Union of Students’ Associations co-president Jordan King said: “There are thousands and thousands of students who use the summer months to get money they need for term time. If they’re forced to make repayments in that time that would be problematic.”
Labour’s tertiary education spokeswoman Maryan Street said Labour welcomed the move to streamline the repayment process but the threshold change was “harsh and punitive”.
“It’s going to be a real headache. The way students are able to keep their student loans down is by amassing savings in their holidays.”
Revenue Minister Peter Dunne acknowledged the change would be unpopular with students.
“It’s one of the issues we want to look at during consultation. What we’re trying to do is simplify the system.”
Changing the threshold so it was based on the amount received in a regular pay cycle rather than a projected annual income meant over- and underpayments would be identified and corrected earlier, rather than at the end of the financial year.
Other proposed changes included scrapping the late-payment penalty charged to overseas borrowers in favour of a higher interest rate on their loan, and enabling borrowers to access their loan information, change their account details and make payments online.
The IRD plans to develop policy proposals over the next few months and introduce legislation this year. The changes would apply from 2011.
CRUNCHING THE NUMBERS
The student loan repayment threshold is currently set at $19,084.
Those earning more than $19,084 a year must pay 10 cents for every dollar they earn over the threshold.
There are more than 535,000 student loan borrowers and more than 40,000 are overseas.
Total student loan debt is currently $9.5 billion.
This is expected to rise to $14-15b by 2015.
Source: Inland Revenue Department
