Dunne Peter: Student Loan Scheme Amendment Bill — First Reading 
Dunne Peter: Student Loan Scheme Amendment Bill — First Reading 
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Hon PETER DUNNE (Minister of Revenue) 
: 
 I move  
That the Student Loan Scheme Amendment Bill be now read a first time. 
 At the appropriate time I will be recommending that this bill be referred to the Finance and Expenditure Committee for its consideration. 
The student loan scheme represents a major financial investment by the New Zealand Government in New Zealanders’ future. It is a generous scheme that since its introduction in 1992 has supported many thousands of students through our tertiary institutions and into productive careers. However the support provided through the student loan scheme is subject to the same responsibilities and obligations as any substantial financial loan assistance—that is it is a loan and it is expected to be repaid. 
Currently there are some 621000 borrowers who have a loan balance with the Inland Revenue Department. The nominal loan balance is about $12.07 billion so it is important that the Government takes all necessary steps to ensure that the student loan scheme is managed as efficiently as possible. That expectation was outlined by the Government in Budget 2011 and it is central to the changes proposed in this bill. The bill introduces a range of proposals designed to improve the value efficiency and fairness of the student loan scheme by encouraging greater personal responsibility and accountability on the part of borrowers towards their repayment obligations. 
To introduce greater fairness across the student loan scheme the bill proposes to maximise loan repayments made by New Zealand - based borrowers by removing the ability to offset losses against net income in order to reduce their liability for student loan repayment purposes. As a consequence of this measure the bill also proposes to extend pay period assessments to the earnings of all borrowers thereby removing the need for the annual square-up assessment for borrowers’ salary and wage earnings. However borrowers who have significantly overpaid their repayment obligations on a pay period basis will still be able to apply for a refund and those who have significantly underpaid will have catch-up deductions. 
In a further measure to help improve borrower accountability the bill also gives the Inland Revenue Department the ability to receive a borrower’s contact person details from StudyLink. The purpose of this change is to help facilitate the Inland Revenue Department’s contact with borrowers who are in default and who have not updated their current address details so that they re-enter the repayment system. Although this is a particular problem among borrowers who have left New Zealand to embark on overseas travel it is equally relevant to New Zealand - based borrowers who may change address frequently after they complete their studies. For this reason from 1 January 2013 all new loan applications will require a contact person to be nominated by the borrower. It is worth noting that a contact person will be contacted only for the purpose of providing a borrower’s most recent contact details and they must be willing to act in that capacity. They will not be made privy to any details relating to a borrower’s loan balance. 
To further improve the repayment levels of overseas-based borrowers the current repayment holiday provision will be reduced from 3 years to 1 year. Since 2007 borrowers have received an automatic 3-year suspension from their loan-repayment obligations upon leaving New Zealand. This is a very generous provision aimed at giving young New Zealanders the flexibility to undertake overseas travel at a time when their earnings can be sporadic. However after the 3-year holiday has ended some borrowers become out of touch with the Inland Revenue Department and become unaware that their repayment obligations have resumed. So to encourage borrowers in this position to resume their repayments when the repayment holiday come to an end the bill proposes that borrowers who intend to go overseas from 1 April next year will be required to apply for the repayment holiday up to 6 months from the date of their departure and to supply a New Zealand - based contact person as a condition of their application. 
Finally the bill contains a number of small minor technical amendments to ensure its effective operation. For the vast majority of loan borrowers who do the right thing and repay their loan on time the changes proposed in the bill will be a welcome step towards improving the overall integrity of the student loan scheme by instilling greater fairness and accountability in the system. For the Government it is a matter of good governance to ensure that the student loan scheme operates efficiently and with fairness. The measures contained in this bill are designed to achieve those objectives by ensuring that student loan borrowers continue to pay back their loans according to the rules. I commend the bill to the House.