Key Takeaways
- National proposes cutting New Zealand student loan repayments from 12% to 10% above NZ$24,128.
- The repayment reduction would cost NZ$438 million over five years.
- Overseas defaulters could face higher interest, penalties and stricter enforcement.
National plans to cut student loan repayments for graduates who stay in New Zealand from April 2027 while imposing tougher penalties on overseas borrowers who default.
National Plans Lower Repayment Rate
If re-elected, National would reduce the compulsory repayment rate for New Zealand student loans from 12 cents to 10 cents for every dollar earned above NZ$24,128, beginning April 1, 2027.
Finance spokesperson Nicola Willis announced the policy Sunday alongside National Party leader Christopher Luxon in Auckland. The party says the change would help young graduates keep more of their income during the early stages of their careers.
Willis said the policy is designed to encourage skilled graduates to remain in New Zealand rather than move overseas.
“That is how we keep talent here, as part of our wider plan to fix the basics and build the future,” Willis said.
National estimates the repayment reduction would cost NZ$438 million over five years. Of that amount, NZ$283 million would be a one-time write-down of the existing student loan book in the 2026-27 financial year.
Party Targets Overseas Loan Defaulters
National also plans tougher enforcement against New Zealanders living overseas who fail to repay their New Zealand student loans.
The party proposes adding 1 percentage point to the annual interest rate on overseas-based student loan balances, taking it to 6.6%. Additional tiered penalties would apply to borrowers who remain in default, on top of existing late-payment interest.
National would also use KiwiSaver funds to repay outstanding student loans when overseas-based borrowers withdraw or transfer their savings under the permanent migration test.
The party further proposes lowering the threshold for issuing a border arrest warrant. Under the plan, authorities could seek a warrant for serious and sustained default without having to prove that a borrower knowingly refused to make payments.
National estimates the overseas enforcement measures would generate about NZ$15 million a year in net recoveries.
Willis said the government should distinguish between graduates who are repaying their New Zealand student loans while building careers in New Zealand and those who leave the country without meeting their obligations.
“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,” she said.
Graduates Could Keep More Pay
National says the lower repayment rate would provide immediate income relief for graduates with New Zealand student loans.
Under the party’s estimates, an accountant earning NZ$75,000 a year would keep an additional NZ$39 a fortnight, or about NZ$1,000 a year. A junior doctor earning NZ$100,000 would keep an extra NZ$58 a fortnight, or about NZ$1,500 annually.
Willis said the change would allow borrowers to repay their interest-free loans over a longer period while retaining more of their income.
“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,” Willis said.
National has branded the proposal its “Back Pocket Boost for Graduates.” The party says the policy would reward graduates who remain in New Zealand while increasing pressure on overseas-based borrowers who fail to meet their repayment obligations.
Visit more of our news! Future Education Magazine