A re-elected National Government will let Kiwis with student loans who stay in New Zealand keep more of what they earn, while toughening up on those who leave the country before paying back their loan, Finance Minister Nicola Willis says.
"New Zealand's positive economic outlook is helping reverse the brain drain, with a 14 per cent increase in Kiwis moving home from Australia. National will go further to make New Zealand even more rewarding for young Kiwis to build their future.
"National will reduce the compulsory student loan repayment rate from 12 per cent to 10 per cent from 1 April 2027, complementing our promise of no new taxes and further boosting the take-home pay for workers with student loans in New Zealand.
"Right now, compulsory student loan repayments are paid at 12 cents on every dollar earned above $24,128. It is often one of the biggest weekly expenses for a young graduate.
"Reducing this to 10 cents means an accountant starting out in their career and earning $75,000 per year would keep an extra $39 a fortnight, or around $1000 a year.
"A junior doctor with a student loan earning $100,000 a year would keep an extra $58 a fortnight, or $1,500 a year.
"It means borrowers can repay their interest-free loans over a longer period and keep more of their pay in their back pocket, which can make a big difference when they're at the start of their careers and earning at the lower end of their profession.
"At the same time, it's not fair for graduates to take their skills offshore after receiving a heavily subsidised tertiary education, and not try to repay their loan.
"Overseas-based borrowers currently account for 93 per cent of overdue student loan debt. Only around three in 10 meet their repayment obligations in a given year, compared to 95 per cent of New Zealand-based borrowers.
"That is why National will introduce tougher measures to recover student loan debt from people who move overseas."
This includes:
- New financial penalties: 1 per cent added to annual interest on overseas-based borrower balances, taking it to 6.6 per cent, with tiered penalties for sustained default, on top of existing late payment interest.
- Restricted KiwiSaver withdrawals, so people who move overseas permanently must clear their student loan before accessing KiwiSaver.
- Tighter arrest settings, so arrest warrants can be sought for serious, sustained default without needing to prove a borrower knowingly refused to pay.
"National's Back Pocket Boost for Graduates will reward young graduates who choose to stay in New Zealand, while pursuing those who leave and default.
"That is how we keep talent here, as part of our wider plan to fix the basics and build the future," Ms Willis says.
Read our full Back Pocket Boost for Graduates plan HERE
