Millions saved from student loan changes
The Government has squeezed hundreds of millions of dollars in savings from the student loan scheme through a series of changes.
Tertiary Education Minister Steven Joyce and Revenue Minister Peter Dunne today announced the write-off on student loans had fallen to 39 cents in every dollar borrowed.
It had been about 48 cents in every dollar when the former Labour-led Government took interest off student loans, Joyce said.
''When we came into government, we committed to get that cost down and initially targeted getting it under 40 cents in the dollar,'' Joyce said.
"I'm pleased to be able to say that changes over the past three budgets have helped reduce that cost from 48 cents to 39 cents in the dollar so far. That's a very significant achievement which reduces the overall write-off cost, and increases the value of the student loan book."
The Government has introduced a number of changes to the loan scheme designed to tighten elibility and recoup more of the outstanding debt quicker.
In this year's Budget, the compulsory repayment rate for former students was increased from 10 to 12 per cent of all income earned over $19,084 per annum. The repayment incentive scheme, which offered a 10 per cent discount on voluntary repayments, was scrapped.
The change in repayment rates took $20 a week out of the pay of someone on $70,000 per year or $11.12 a week out of someone on $48,000.
Those changes, alongside a tightening of the student allowance scheme, were predicted to provide a one-off revaluation of the student loan book of about $250m as well as $60 to $70 million of annual savings. Joyce today said the changes had actually improved the value of the loan book by $286m.
Other changes to the scheme rolled out in previous years have included cutting the ''repayment holiday'' period for people overseas, refusing loans for living costs to those aged over 55 and freezing the repayment threshold at $19,084 until 2015.
Dunne said there could be further improvements by ''improving the compliance of overseas-based borrowers''.
"Inland Revenue is currently focusing in this area through its initiative to collect overdue repayments from overseas-based borrowers. To date, the initiative has been successful in contacting and collecting from these borrowers who previously made little or no repayments toward their student loan," Dunne said.
The programme targeting off-shore borrowers had been extended to reach 57,000 people living largely in Australia and the United Kingdom.
There is a total of about $13b in student debt outstanding. About 82 per cent of full-time students take out a student loan.
- © Fairfax NZ News
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