Independent review of certain student loan operational matters

Executive summary

Introduction

During 2007 it became evident to Inland Revenue senior management that the loan liabilities of a significant number of student loan borrowers were being incorrectly assessed over a prolonged period. Throughout 2007 and 2008 Inland Revenue has undertaken a range of actions to rectify the incorrect assessment of student loan liabilities.

In February 2008 the Commissioner of Inland Revenue asked the State Services Commission to conduct an independent review of the circumstances and actions that resulted in the loan liabilities of a significant number of student loan borrowers being incorrectly assessed.

The purpose of the review is to:

• Provide assurance to both the Minister of Revenue and the Commissioner of Inland Revenue as to the adequacy of the actions being taken to address the incorrect assessments.
• Identify any lessons that may be learnt for the ongoing effective and efficient administration of student loans debt.

Our findings

We are satisfied that the circumstances and actions that resulted in a significant number of student loan borrowers being incorrectly granted interest write offs is now well understood by Inland Revenue senior management.

We are also satisfied that appropriate mitigation strategies are being put into effect, although it should be noted that the implementation of these mitigation strategies will not be fully completed until late 2009.

The decision to leverage the tax system to manage the repayment of student loans was appropriate (given repayment is linked to income) and has provided the Crown with an effective means of collection. However, it needs to be recognised that the use of Inland Revenue as a student loan repayment administrator has significant ongoing limitations given:

• It is a reactive repayment regime that is based on the annual tax cycle. The management of the student loan borrowers through the tax system is markedly different from how a bank would typically manage the risks associated with providing unsecured loans to a highly transient population (i.e. students).
• The high level of manual processing that continues to be required given the business process and system constraints within which Inland Revenue must work.

We have recommended that discussions be held between the Ministry of Education, Treasury and Inland Revenue to establish a comprehensive set of loan repayment performance measures. It is likely that had clearer performance measures been in place that many of the problems relating to the incorrect assessment of student loan liabilities would have surfaced much earlier.

Other pages in: Independent review of certain student loan operational matters

• Index
• Disclaimer
• Introduction
• Review team and approach
• Non assessment of domestic student loan liabilities
• Incorrect student loan interest write–offs
• Other operational matters
• Findings
• Recommendations
• Appendix A Terms of reference
• Appendix B List of interviewees
• Appendix C Student Loan Improvement Project timeline
• Appendix D Profile of overdue student loan repayments

Date published: 22 Feb 2009

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