The compulsory student loan repayment rate would drop from 12% to 10%, while overseas-based borrowers who don’t pay would face new penalties, writes Henry Oliver in today’s excerpt from The Bulletin.
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National has made its pitch to young voters: lower student loan repayments for graduates who stay in New Zealand, and tougher enforcement for those who leave without paying.
Finance spokesperson Nicola Willis announced the policy yesterday, promising to reduce the repayment rate from 12 cents to 10 cents on every dollar earned above $24,128, RNZ reported. The change would take effect from April 2027 and is forecast to cost $438m over five years, according to 1News.
“Compulsory student loan repayments are paid at 12 cents on every dollar earned above $24,128. It is often one of the biggest weekly expenses for a young graduate,” Willis said. “Reducing this to 10 cents means an accountant starting out in their career and earning $75,000 per year would keep an extra $39 a fortnight, or around $1,000 a year.”
Cracking down on overseas borrowers
The party is also promising tougher penalties for borrowers who leave New Zealand without repaying. Borrowers living overseas currently make up 93% of overdue student loan debt, with only around 30% meeting their repayment obligations each year, compared to 95% of New Zealand-based borrowers, RNZ reported.
So in addition to lowering the repayment rate for those that stay, National would add 1% to the annual interest charged for those that leave, taking it to 6.6%, with additional tiered penalties for sustained non-payment. The party would also restrict KiwiSaver withdrawals for overseas borrowers and make it easier for police to issue arrest warrants for “serious, sustained loan defaults,” 1News reported.
Willis said it was not fair for graduates to “take their skills offshore after receiving a heavily subsidised tertiary education, and not try to repay their loan.”
Kicking the can down the road
Labour’s tertiary education spokesperson Shanan Halbert said any relief for graduates was welcome, but young people would judge National on its whole record when it comes to tertiary education. “National has allowed back-to-back fee hikes of up to 6% and is proposing another next year,” he told RNZ. “That would allow fees to rise by up to 19% over three years. They’ve also frozen the student loan repayment threshold so around 370,000 borrowers have to repay their loans faster”.
The Victoria University Students Association president, Aidan Donoghue, described the announcement as a “solid ‘meh’.” “For students this is a step in the right direction, however it isn’t much of a tangible change. The savings are zero, in the long run you are still paying that money back, and it means you’re just kicking the can down the road in terms of repayment,” he told RNZ.
Donoghue doubted the tougher overseas measures would work, saying if graduates were moving to a country with higher wages, the threat of added interest wouldn’t deter them. He was also concerned that students might be “locked out of the country for fear of being arrested” if they failed to make payments.
Meanwhile… university enrolments are up!
The announcement comes as new data shows university enrolments are rising, while enrolments in trades training are declining. A Tertiary Education Commission report found that in April, university enrolments increased 4%, driven largely by the University of Auckland and the University of Canterbury, RNZ’s John Gerritsen reported yesterday. But vocational education and training dropped 5%, with work-based apprenticeships down 10% compared to the same time last year.
