A bill tabled in Parliament today will make it easier for those with student loans to manage them online, Revenue Minister Peter Dunne said.
The Student Loan Scheme Bill paves the way for borrowers to communicate with Inland Revenue online and vice versa, and is part of a package of reforms to simplify the way Inland Revenue administers student loans, he said.
“Public consultation last year confirmed that borrowers want Inland Revenue to move away from paper-based letters and statements and replace them with modern electronic technologies that allow them to manage their loan anywhere, anytime.
“This will be a significant improvement for overseas-based borrowers in particular, who tend to be more mobile than those based in New Zealand,” Mr Dunne said.
Borrowers will be able to get a consolidated view of their loan balance when the changes come into effect in April 2012.
“The overwhelming majority of borrowers will also benefit from a further change removing annual end-of-year assessments or “square-ups” if their income is from salary and wages only and their before-tax income is over the pay-period repayment thresholds,” he said.
Instead, Inland Revenue will consider loan repayment deductions made from salary and wages to be correct and final for the pay-period, meaning minor over- or under-payments will be ignored so there are no surprise bills for these borrowers.
“Some borrowers who also have income from sources that are not required to have loan deductions made from them – for example, interest from investments – will need to file a declaration of pre-taxed income and make loan repayments similar to provisional tax payments.”
Mr Dunne said changes are also being made to simplify the current penalty rules when borrowers do not make required repayments by more closely aligning them with the tax penalty rules more generally, and by replacing the late payment penalty rules with a lesser interest rate “so an individual’s debt does not quickly become insurmountable.”
The current compounding monthly late payment penalty of 1.5 percent (equivalent to 19.56 percent interest a year) would be replaced with a late payment interest charge on overdue amounts. The late payment interest will be imposed at the base interest rate plus a penalty margin of 4% each year. Based on the current base interest rate of 6.6%, this gives a late payment interest rate of (10.6% a year). The penalty margin will be lowered to 2% for borrowers who enter into instalment arrangements, giving a total interest rate of 8.6% based on the current base interest rate.
These changes will apply from 1 April 2012.