National Offers Student Loan Relief but Targets Offshore Debtors

Finance Minister Nicola Willis has announced that if re-elected, the National government will lower the domestic repayment rate for student loans from 12 cents to 10 cents for every dollar earned above $24,128 a year. This change is set to take effect from April 1, 2027.

The proposed reduction in repayment rates aims to benefit young graduates who stay in New Zealand by giving them more disposable income at the start of their careers. According to National's estimates, an accountant earning $75,000 would retain an extra $39 a fortnight, or around $1000 a year, while a junior doctor earning $100,000 would keep an additional $58 a fortnight, or $1500 a year.

The trade-off for this relief is slower repayment. National's example of a 24-year-old engineer with a $65,000 loan showed the debt being cleared at about 36 instead of 34 years. The change is estimated to cost around $438.6 million over five years, or $372.6 million net after offshore measures.

However, National also proposes introducing tougher measures to recover student loan debt from people who move overseas. This includes adding one percentage point to annual interest on overseas-based balances, lifting the current 5.6% rate to 6.6%, and additional tiered penalties for sustained default.