National pledges lower student loan repayment rate, tougher stance on overseas borrowers
National is promising to cut the compulsory student loan repayment rate from 12 percent to 10 percent if re-elected, with the change due to take effect from April 2027.
Finance spokesperson Nicola Willis said the current system requires borrowers to pay 12 cents for every dollar earned above the repayment threshold of $24,128. Dropping that to 10 cents would mean a graduate earning $75,000 a year — an accountant starting out, in Willis's example — would keep an extra $39 a fortnight, or about $1,000 a year. RNZ
The rate cut comes alongside a crackdown on overseas-based borrowers, who Willis said account for 93 percent of overdue student loan debt. Only about three in ten overseas borrowers meet their repayment obligations in any given year, compared with 95 percent of borrowers living in New Zealand.
National's proposed penalties for overseas defaulters include adding interest to loan balances, restricting KiwiSaver withdrawals, and making it easier for police to issue arrest warrants for serious, sustained loan defaults. RNZ
The two-pronged approach — easing the burden on New Zealand-based borrowers while getting tougher on those offshore — points to where National sees the core problem. The gap between domestic and overseas repayment rates is stark: 95 percent of local borrowers pay on time, versus roughly 30 percent of those abroad. Whether the proposed penalties can meaningfully shift that offshore rate is the open question, given how hard it is to enforce New Zealand debt obligations against people living in other countries.
For domestic borrowers, the rate reduction is small per person but reaches widely. Anyone earning above the $24,128 threshold would see their deductions drop. The policy does not change the threshold itself, and it does not touch the interest-free status of loans for New Zealand-based borrowers. The change is purely about how quickly loans get paid down.
The overseas enforcement measures would pull on levers across several government agencies. Restricting KiwiSaver withdrawals would involve the scheme's administrators and likely require changes to the KiwiSaver Act. Arrest warrants for loan defaults already exist in law but are rarely used; Willis's proposal would lower the threshold or streamline the process for police to act. Adding interest to overseas borrowers' loans would build on the existing system, which already charges interest to those based offshore, by using it as a penalty for non-compliance rather than just a baseline charge.
The announcement lands ahead of the 2026 election, with student loan policy sitting at the point where cost-of-living pressures meet fiscal management. The rate reduction has a direct fiscal cost because loans are repaid more slowly, partially offset by the enforcement measures targeting overdue debt concentrated offshore. National has not yet released costings for the package.
The broader context here is whether the balance Willis has struck — relief for working graduates, accountability for those who leave without paying — can work in practice. The 93 percent figure for overdue debt tied to overseas borrowers shows how concentrated the arrears problem is in that group. But the small share of overseas borrowers who comply voluntarily suggests the existing enforcement framework has had limited effect, and it is far from clear that the new measures would change that.
The April 2027 start date means the rate change would not take effect until well into the next parliamentary term, assuming National forms government after the election. That timeline gives Treasury and Inland Revenue room to implement the systems changes needed for a different repayment rate, though it also means borrowers would not see any change for the better part of a year after the election.
