Starting 1 April, student loans will be interest-free for all borrowers living in New Zealand.
The interest-free scheme will apply to existing and new borrowers, but only interest from 1 April 2006 onwards will be written off. Interest accrued before that will still have to be repaid.
Interest will still appear on loan statements, but will be automatically written off at the end of each year. Borrower do not need to do anything. However, the old system of interest write-offs for those studying is still active, and those wanting a write-off for 2005 will still need to apply.
To be eligible for the new interest write-offs, borrowers have to be living in New Zealand for 6 months or more, and will lose their eligibility if they leave the country for more than 6 months, with exceptions for borrowers who are:
* Studying full-time at post-graduate level overseas
* Working for the NZ government
* Overseas as part of their NZ-based job
* Volunteering for an approved charity
* Accompanying a partner doing one of the above
* Unexpectedly delayed while returning to NZ
* Having an unplanned absence from NZ
Borrowers travelling overseas will have to contact IRD to check their eligibility for an interest write-off.
Currently, if IRD suspects that a borrower has left the country without informing them, it can access data from Customs and Immigration to determine the borrower’s whereabouts. National Design Manager for the student loans programme Andrew Minto says that the IRD are “looking at a broader approach” that would see the IRD actively accessing customs and immigration data to look for borrowers who have left the country. However, legislation would be required for this to happen and Minto says that it is “early days.”