Photo: RNZ / KATE NEWTON
If you are paying interest on your student loan, your account is about to get bigger.
Although student loans are free of interest to people who remain in New Zealand, interest is accused when people move abroad.
From April 1, additional 1 % will be applied to student loan interest rates, as well as the annual recalculation at the rates that occurs.
This will bring the basic fee to 4.9 %, the payment fee delayed to 8.9 %, which is charged in late amounts of student loan borrowers in New Zealand and abroad, and the late payment fee reduced to 6.9 %.
The forecast for the 2026 rate is 4.9 %, rising to a maximum of 6.6 %in 2030 before decreasing to about 6.0 %.
Craig Renney, policy and economist director of the union council, said the increase would not raise money for the government, because it had to reduce about 50 % of the cost of student loans as they were issued due to the free period of interest and the fact that some people have never paid them.
“The highest interest rate, the highest low”.
But he said that any increase in student loan interest rate was a disincentive for people to return to New Zealand.
People who were skillful and spent some time under tertiary study and were receiving higher offers abroad may never decide to return if their debt had been out of control, Renney said.
He said that those with higher debts can sometimes be the most qualified.
“There will be some people who are making a horrible decision about not seeing your family again.”
By 2020, there were cases of border prisons with student loan debt. About 20 people who default on their student loans are being monitored by possible prison if they return to New Zealand, the inner revenue said at the time.
Renney said there was little justification for having a defined interest rate beyond the cost of government loans.
“The government’s 10 -year rate is nowhere to 6 %. There is no economic value in doing so.”
The latest student loans report showed that 105,434 borrowers had late payments, of which 74 % were abroad. Debt overdue for students was worth US $ 2.375 billion, of which 93 % were due for borrowed abroad.
Although the number of overdue payments has fallen 1.5 % over the previous year, the amount expired increased by 9.1 %.
There were 27,346 New Zealand borrowers with late payments in the year, below 30,037 the previous year.
More than 85 % of outdoor borrowers in debt had been outside New Zealand for over five years.
The report noted that RI adopted an approach to supporting borrowers through the pandemic, but last year returned to the use of a “range of approaches” to improve compliance and reduce overdue payments.
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