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Student Loan Scheme Act 2011

The Student Loan Scheme Bill 2010 was introduced into Parliament on 27 August 2010. It received its first reading on 14 October 2010 and its second and third readings on 16 August 2011.

The Act reforms the way student loans are repaid by removing the end-of-year assessment process for the majority of borrowers, and the way borrowers manage their loans by increasing use of online services. It also rewrites the Student Loan Scheme Act 1992 and replaces the Student Loan Scheme Act 1992 from 1 April 2012.

Several changes were made to the bill at the Select Committee stage. The main changes were to delay the application of certain provisions until 1 April 2013 to give Inland Revenue more time to implement the changes in the bill. The Government also introduced Supplementary Order Paper No 200 at the Select Committee stage giving Inland Revenue the ability to recall student loans in cases of significant default in the repayment of a loan.

The resulting Act received Royal assent on 29 August 2011. This Act also amends a number of other Acts, including the Student Loan Scheme Act 1992, the Credit Contracts and Consumer Finance Act 2003 and the Tax Administration Act 1994.

Establishment of a student loan

Changes have been made to allow information to be transferred between StudyLink and Inland Revenue to enable the establishment of a loan account. The Act also provides for a near real-time transfer of loan advances from StudyLink to Inland Revenue to allow Inland Revenue to provide borrowers with a consolidated view of their loan balance.

Determining whether borrowers are New Zealand-based or overseas-based

Changes have been made to the way borrowers who qualify for one of the exemptions from the requirement to be present in New Zealand are treated for the purposes of determining whether they are New Zealand-based.

Borrower’s repayment obligations

The basis of assessment for salary and wage earners has been changed from an annual basis with an end-of-year assessment, to a pay-period basis. This means student loan deductions from salary and wages will be considered correct each pay day, unless there has been a significant over- or under-deduction.

Excess repayments

Changes have been made to the way excess repayments are dealt with to account for the move towards loan repayments being determined on a pay-period basis. This includes re-enacting the existing excess repayment bonus provisions.

Interest, relief, penalties and offences, objections, disputes and challenges

Changes have been made to the interest and penalty provisions to bring the offences and penalty amounts up to date and into line with those that apply for tax offences more generally. These will have the effect of strengthening the rules applying to those who default on their student loan repayments.

Miscellaneous amendments

Changes have been made to the way payments are allocated and offset against a borrower’s consolidated loan balance, and an annual administration fee of $40 introduced to reflect the cost of administering the loan. There are also a number of other general amendments made to the Act, which are outlined below, together with the introduction of a new provision that allows the Commissioner to recall a loan, on demand, in certain circumstances.