The National Party has proposed a series of changes aimed at reforming New Zealand’s student loan repayment system, including lowering the compulsory repayment rate for borrowers residing in the country and imposing stricter measures on those who move overseas without settling their debts. The policy announcement was made on August 30 at Rocket Lab by Prime Minister Christopher Luxon and National finance spokesperson Nicola Willis.

Under the proposal, the compulsory repayment rate would be reduced from 12% to 10% of income earned above the current threshold of NZD 24,128 for borrowers living in New Zealand. Willis noted that the reduction would allow a graduate earning NZD 75,000 annually to retain an additional NZD 39 per fortnight, equating to roughly NZD 1,000 more per year. This change would take effect starting April 2027 if National is returned to government.

Conversely, the party plans to introduce tougher penalties for borrowers who are overseas-based and fail to repay their loans. Interest on these loan balances would increase by 1% annually, raising the total interest rate on foreign-held loans to 5.6%. Repeated repayment failures would trigger tiered penalties on top of existing interest charges. The policy would also facilitate easier pursuit of arrest warrants for serious defaults by removing the requirement to prove a borrower knowingly avoided repayment. Additionally, individuals relocating abroad would be required to clear outstanding student loans before accessing KiwiSaver funds or transferring those savings to overseas pension schemes.

Other components of the plan include empowering the government to place holds on borrowers’ assets until debts are fully repaid and allocating NZD 10 million to Inland Revenue for contracting debt collection agencies in the United Kingdom and Australia. National projects this investment could yield NZD 25 million in recovered repayments. The proposal carries a projected NZD 296 million impact on next year’s budget due to delayed repayments diminishing in value over time.

Luxon framed the reforms as a measure to protect taxpayer investment in tertiary education, pointing out that students currently contribute around 30% of the full cost of their qualifications, with the remainder subsidised by the state. He emphasized the importance of ensuring that graduates repay loans, especially when they move overseas after benefiting from the subsidy, stating it is unfair for these individuals to contribute economically to another country while leaving debts unpaid.

Data cited by National indicates that overseas borrowers account for 93% of outstanding student loan debt, with only about 30% of those borrowers meeting repayment obligations annually, compared to a 95% repayment rate among those residing in New Zealand.

The opposition Labour Party responded critically, highlighting that National previously increased the repayment rate from 10% to 12% in 2012. Labour tertiary education spokesperson Shanan Halbert characterized the current proposal as a reversal of that earlier decision, framed primarily as an election-year commitment. Halbert also pointed to National’s history of permitting annual tuition fee increases of up to 6%, along with a forthcoming proposal that could raise fees by a total of 19% over three years. She further criticized National for freezing the student loan repayment threshold, which compelled around 370,000 borrowers to begin repaying their loans sooner.

While Labour agrees repayment is necessary, Halbert underscored that the broader challenge remains the number of young New Zealanders struggling economically and opting to pursue careers overseas.