What National's student loan plan means for you
National says it will cut the rate at which graduates must pay back their student loans, if it wins the next election. The change would start in April 2027.
Right now, if you have a student loan and earn more than $24,128 a year, the government takes 12 cents out of every dollar above that amount to repay your loan. National wants to drop that to 10 cents. Finance spokesperson Nicola Willis said a graduate earning $75,000 a year would keep an extra $39 a fortnight, or about $1,000 a year. RNZ
At the same time, National wants to get tougher on borrowers who have moved overseas. Willis said these borrowers make up 93 percent of all overdue student loan debt. Only about three in ten overseas borrowers pay what they owe each year, compared with 95 percent of borrowers still living in New Zealand.
National's proposed penalties for overseas defaulters include adding interest to their loan balances, restricting access to their KiwiSaver savings, and making it easier for police to issue arrest warrants for people who seriously and persistently avoid repaying. RNZ
The plan has two parts: making things easier for borrowers living in New Zealand, and making things harder for those who have left. The repayment gap between the two groups is wide. Nearly all New Zealand-based borrowers pay on time. Only about a third of overseas borrowers do the same.
The rate cut itself is small per person but would affect everyone earning above the $24,128 threshold. It does not change that threshold, and it does not change the fact that loans are interest-free for people living in New Zealand. It simply means loans get paid off a bit more slowly.
The overseas enforcement side would involve several government agencies. Restricting KiwiSaver withdrawals would likely need a law change. Arrest warrants for loan defaults already exist but are rarely used. Willis's plan would make it easier for police to act. Adding interest as a penalty would build on the current system, which already charges interest to overseas borrowers.
National has not yet said how much the package would cost. The rate cut means the government gets its money back more slowly, and the enforcement measures are meant to partly offset that by chasing overdue debt offshore.
The open question is whether these penalties would actually work. Enforcing New Zealand debt against someone living in another country is difficult, and the fact that so few overseas borrowers pay voluntarily suggests current rules have not had much effect.
The April 2027 start date means borrowers would not see any change for the better part of a year after the election. National says that gives Treasury and Inland Revenue time to update their systems for the new rate.
