Dunne Peter: Student Loan Scheme (Repayment Bonus) Amendment Bill — Second Reading 
Dunne Peter: Student Loan Scheme (Repayment Bonus) Amendment Bill — Second Reading 
[Volume:657;Page:6304] 
Hon PETER DUNNE (Minister of Revenue) 
: 
 I move  
That the Student Loan Scheme (Repayment Bonus) Amendment Bill be now read a second time 
. This bill is comparatively short in form but it is substantial in its significance. I need to put into context why this measure is being proposed. 
Since the student loan scheme was introduced in 1992 nearly 800000 New Zealanders have taken out a loan to help them continue their education at a tertiary level. As the number of borrowers in the scheme has grown over the years a number of changes have also been made to it. One of the more significant of these changes was the introduction of interest-free loans in 2006 which has given a major boost to those people who would not otherwise have had the opportunity to further their education. 
The measures that are contained in this bill follow on from that change and are aimed at encouraging borrowers to repay their student loans faster. There are two points I will highlight. Borrowers paying off their loans earlier benefits not only the individual borrowers as they move through their careers but also the Crown in managing what is now a $9.6 billion asset. To put it simply the longer that it takes borrowers to repay their loans the more expensive the cost of that borrowing becomes to the Crown. 
The bill introduces an incentive for faster repayments in the form of a 10 percent bonus for borrowers who make extra payments that total $500 or more in any given tax year. Under the provisions in the bill all borrowers including those who are overseas will be eligible for the bonus provided that they are meeting their student loan obligations and that they have a loan balance with the Inland Revenue Department of $550 or more at the beginning of the tax year in which they make their extra repayments. The bonus will then be added or credited to their account after the end of the tax year in question. For those who want to pay off their loan in full the maximum bonus that is payable is one-eleventh of the loan bonus. Once it is enacted this legislation will have effect from 1 April this year with the bonus being credited to borrowers’ loan accounts after 1 April 2010. Because there is no time limit to the entitlement to the bonus borrowers who may be better placed to make extra repayments later in their working lives when their financial position is stronger will be able to do so under the provisions of this bill. 
In reporting back the bill to the House the Education and Science Committee made a number of small recommendations mainly of a technical nature to ensure that the bill and the scheme work as intended. I acknowledge the work of the committee and the officials who served it for their detailed consideration of the bill and for the recommendations that they have made to make the scheme work as proposed. I think that the bill as it now stands and the measures that it contains will give borrowers who want to pay off their student loans early a useful and welcome incentive to do so. 
This is an important step forward. But it would be an error to say as I think some members on the other side of the House seek to assume that this is the only measure or incentive to improve and facilitate the repayment of student loans and to make the system better. We are currently undertaking consultation on a range of other initiatives and announcements will be made in due course about further enhancements to the scheme. In the meantime I say to the House that this is a significant incentive for students to pay their loans earlier. I cannot fathom why anyone would oppose the introduction of such an incentive. Therefore I commend the bill to the House.