On September 7th the Revenue Minister Peter Dunne introduced the Student Loan Scheme Amendment Bill, which aims to tighten the rules applicable for student loan holders. If approved, the legislation will cut down the repayment holidays available to borrowers who are traveling overseas, and will also require borrowers to nominate a contact person when leaving the country.

Commenting on the intentions of the bill, Peter Dunne said, “…essentially, we are cleaning up the whole area around defaulting on student loans and addressing the overall size of student loan debt.”

The Bill will require that loan borrowers who leave the country for an extended period of time, will no longer automatically receive a student loan repayment holiday, and must now apply for one. As part of the process, a contact person will have to be nominated, who will provide the Inland Revenue Department (IRD) with details of the borrowers overseas address, if they are asked. In addition, when a new borrowers apply for a loan, they must also nominate a contact person, as a condition of obtaining a student loan.

Borrowers who are already based overseas will also find that their repayment holiday time limit will be reduced from three years to one year. Peter Dunne said that once a person has lived overseas for more than two years, it is reasonable to assume that they have found paid employment.

The passing of the bill will also see the exclusion of losses from the calculation of annual incomes, for the purposes of student loan repayments.

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As of December last year, the number of New Zealanders with student loans who have are now overseas has reached 88 000. Cumulatively the borrowers face a combined debt of NZD 2.3 billion, totaling over 20 percent of the country’s student loans. As of early 2011, nearly NZD 200 million of the debts were overdue for repayment, with an approximate 35 000 borrowers being behind on their obligations.

On April 18th the Inland Revenue Department (IRD) Deputy Commissioner Service Delivery Carolyn Tremain said that the Department would begin an email campaign to remind borrowers of their payment obligations. She went on to remind people with student loans of their requirement to disclose their intended situation to the IRD if they plan to be out of New Zealand for 183 days or longer.

The new effort comes as the latest push by the New Zealand Government to shore up extra funds to pay for the rebuild of Christchurch following the recent earthquake. New Zealander of the Year Professor Sir Paul Callaghan has sent an open letter to the overseas based borrowers, saying that any payments they make towards their loans, would be a heroic effort, which will aid the country’s recovery.

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On December 15th the Revenue Minister Peter Dunne announced a change to national student loan rules, which will allow the Inland Revenue Department (IRD) to recall student loans in occurrences of serious non-compliance by loan-holders.

According to Peter Dunne, there are numerous loan-holders who default on their student loans every year. Such cases are handled by the IRD, who typically provide the individual with options to payback the defaulted loan. However, in extreme cases of non-compliance the Commissioner of Inland Revenue is authorized to recall the entire loan.

The new bill will clarify and greatly expand the instances in which the IRD is able to recall the whole loan. With a clear set of recall powers the IRD will reportedly be able to “better manage cases of serious non-compliance.” Peter Dunne commented on the new rules saying “It’s a fairness issue. The vast majority of borrowers are doing the right thing and repay on time. However others don’t and they can’t be allowed to get away with it.” To prevent any abuse, the bill maintains that the IRD is still only able to exercise the recall powers in extreme cases of non-compliance.

The supplementary bill still needs to be approved by Royal Assent, and is expected to come into power the day following the passing.

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On September 24th the Inland Revenue Department (IRD) issued a statement reminding overseas student loan holders that their repayment holidays have expired and that their first payment is due this month.

The repayment holiday was originally started in 2007, as a means to grant a reprieve from payments to student loan holders who are working overseas. The program was initiated concurrently with an amnesty to borrowers whose accounts were in debt.

The IRD has already sent out letters to a significant proportion of student loan holders, updating them on their payment obligations. However, due to the mobile nature of some individuals, the IRD has not been able to make contact. The IRD has stated that it will not accept ignorance to the changes as a valid justification for missing repayments, and will proceed to charge interest penalties on any overdue amounts.

Charles Ronaldson, IRD Group Manager of Assistance, has urged friends and families of overseas based student loan holders to remind them to check their obligations. He also reminded borrowers that they are still able to receive a 10 percent bonus on their repayment if making a extra payment of NZD 500 or more.

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After a round of public consultations, the New Zealand Government intends to instate several changes to the national student loan system. On August 27th Peter Dunne, Revenue Minister of New Zealand, announced that a bill had been tabled in Parliament with the alterations, saying “Student Loan Scheme Bill paves the way for borrowers to communicate with Inland Revenue online and vice versa, and is part of a package of reforms to simplify the way Inland Revenue administers student loans.”

The bill aims to reduce the number of physical letters and correspondences sent to loan-holders and migrate Studylink to an up-to-date electronic filing system. According to Peter Dunne, the change will be of great benefit to overseas-based borrowers. The bill also removes the currently enforced end-of-year assessments for salary earners whose incomes are over the pay-period repayment thresholds. If the changes are passed, the Inland Revenue Department (IRD) will assume that loan repayment deductions correct and final, and minor end-of-period discrepancies will be ignored.

The penalty payment rules applicable to student loans will also be changed, “so an individual’s debt does not quickly become insurmountable.” Currently, the compounding monthly late payment penalty is set at 1.5 percent, an equivalent to 19.56 percent as an annual interest. Under the bill, the late payment interest will be charged only on overdue amounts, and be levied at the Government’s base interest rate with a 4 percent penalty margin. Borrowers who enter into installment payment plans will be subject to a rate of 2 percent.

If passed, the bill will come into effect in April 2012.

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In an effort to foster a greater sense of charitable work amongst New Zealanders, Peter Dunne, New Zealand Revenue Minister, announced on February 23rd that individuals who are working overseas for Partners Relief and Development NZ will now be eligible for an interest write-off on their student loans. The change is scheduled to come into effect on April 1st.

Typically, student loans are charged interest when an borrower works outside of New Zealand, and an individual is required to reside within New Zealand for at least six months to receive an interest-free student loan; exceptions apply when the employer is charitable organization which is named by an Order of Council by the New Zealand Government. Although, the New Zealand Inland Revenue Department (IRD) retains a legal right deny eligibility to an individual, if it finds adequate reason to do so.

The interest-free allowance for was initiated by the New Zealand Government in March 2006, and featured 48 recognized charitable organizations. At the time of the current announcement, the legislation concerning interest free loan had grown to include 76 applicable organizations.

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The threshold at which student loan holders are required to begin making repayments will remain at $19,084 for the 2010-11 year. The threshold is subject to an annual review, and typically is adjusted according in correspondence to the September consumer price index. The threshold is expected to be reviewed again for the 2011-2012 year.

Commenting on the decision, Peter Dunne said “While the impact on individual borrowers is likely to be minimal, the effect of maintaining the current repayment threshold is expected to lower the overall costs of the scheme to the Crown and is the right decision for the times”.

According to the the Student Loan Scheme 2009 Annual Report, as at June 30th, the nominal value of loan balances was NZ$10,259 million, over 562,000 borrowers.

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Georgie Jensen was sentenced on December 3rd, in the Waihi District Court, after pleading to 13 counts of non-payment of PAYE. Graham Pomeroy, Inland Revenue Assurance Manager, commented on the offences, saying “Failure to meet PAYE obligations is a breach of trust between the director and the employees. But in Jensen’s case, it wasn’t just PAYE but also child support and student loan deductions”.

Georgia Jensen was the director, sole shareholder and an employee of NZ Rigging Services Limited, which she incorporated in 2007. In the period between March 2008 and May 2009, a total of NZ$74,016.69 of PAYE and other employee deductions was withheld from the IRD. Georgia Jensen Since it incorporation, only NZ$7,000 of PAYE payments have been filed by NZ Rigging Services.

Reparation was not sought by the judge, as Georgia Jensen is currently unemployed. Though he did label her actions as “premeditated and deliberate”. Graham Pomeroy commented further by saying that when tax payers act against the system, they not only compromise the integrity of the tax system but cheat the community.

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On the 18th of September it was announced by Peter Dunne, New Zealand Revenue Minister, that governmental allowances had been given to proposed changes to the student loan system. The changes were a product of consultation held in June. In a statement , Peter Dunne said “As a result of hearing a wide range of views, the government has modified one of the main proposals that were presented for consultation a couple of months ago.”

Several changes to the Student Loan scheme were initially proposed by the government, although these were amended after consultation. The most important of these changes includes the dropping of plans to charge student loan repayments if over $367 is earned per week as holiday pay. Instead, this has been replaced with a yearly earning limit of $19,084, below which no repayments are required. Another significant change is the decision to migrate from paper-based management to an electronic system, both internally and for borrowers wishing to access their loan information. Dividends, interest and Maori authority distributions will not be regarded as income if they are under $1,500 annually. Those residing and working in New Zealand will now have their student loan payments deducted along side their PAYE on the same scale as there wages.

The Student Loan Scheme (Exemptions and Miscellaneous Provisions) Amendment Bill was tabled in Parliament on the 4th of August. Revenue Minister Peter Dunne emphasized the need for an efficient and consistent student loan system, as the current student loan amount has reached $9.6 billion, and currently has over half a million borrowers.

Changes introduced into the system include the allowance of residence of Niue, the Cook Islands, Tokelau or the Ross Dependency to utilize the interest free aspect of the student loans. This provision extends to those who are eligible to reside within those territories for 183 consecutive days. Thos wishing to pursue further studies in other countries will also be able to use the interest free element, provided New Zealand and the recipient country have a pre-arranged formal study exchange agreement. Those who are returning to New Zealand and repaying their student loans in less than 183 days will also be eligible for an interest write off. There has also been an allowance for Inland Revenue to increase their standard repayment deduction rate from 10 percent to 15%.