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Early Student Loan Repayment Bonus Passes Into Law

Fuseworks Media
Fuseworks Media

Wellington, Sept 17 NZPA - Legislation to give a bonus to students who make extra loan repayments has passed into law.

The Student Loan Scheme (Repayment Bonus) Amendment Bill was a National Party election promise.

It gives an incentive for faster repayment by giving a 10 percent bonus to borrowers who made extra repayments of $500 or more in a tax year.

An extra payment of $5000 would, for example, attract a bonus of $500.

It will be retrospective to April 1 this year.

Revenue Minister Peter Dunne said there was increasing concern about the mounting level of student debt and whether it would ever be repaid.

Since the introduction of interest-free student loans in 2006, the number of voluntary repayments has been decreasing, with borrowers tending to take longer to repay their loans in full.

Labour MPs originally opposed the bill, with education spokeswoman Maryan Street once describing it as a con, as financial advisers would quickly point out it would be better to invest any extra money elsewhere.

Today Labour voted for the bill and the Government accepted an amendment from Labour MP Trevor Mallard that those paying off their loan quicker should be warned to take financial advice before doing so.

National MPs urged those with student loans to take advantage of the bonus and pay their loans quickly.

Green MPs suspected that the bonus was the first step in a return to interest on student loans, Government speakers rejected this.

They were the only party to oppose the bill in the final vote which was passed by 113 votes to 9.

About 500,000 borrowers owe a total of $9.6 billion in student loans.

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