Building the Future:

A re-elected National Government will let Kiwis with student loans keep more of what they earn, while toughening up on those who leave the country before paying back their loan. National will reduce the compulsory student loan repayment rate from 12 per cent to 10 per cent from 1 April 2027 and introduce tougher measures to recover student loan debt from people who move overseas.

Encouraging young people to stay in New Zealand to build a career, start a business, raise a family and make a contribution to the community and economy is critical to National’s plan to fix the basics and build the future.

National will:

• Reduce the compulsory student loan repayment rate for domestic borrowers from 12 per cent to 10 per cent from 1 April 2027.
• Get tougher on overseas borrowers, with new financial penalties and stronger enforcement actions.

This complements the work National has done to boost the take-home pay of hardworking New Zealanders. During this term of Government, we have prioritised lower taxes for households and businesses as part of our long-term economic plan through:

• Personal income tax relief worth an average of $60 per fortnight
• Tax relief for businesses prepared to invest and grow through Investment Boost
• Abolishing the Auckland Regional Fuel Tax and the Ute Tax
• Cancelling Labour’s tenant taxes, which pushed rents higher and worsened the cost of living.

A re-elected National Government will continue that work, by spending carefully, reducing wasteful spending, supporting people to save more, and finding opportunities for working Kiwis to have more in their take-home pay, so life in New Zealand is more attractive.

The economic fundamentals are increasingly shifting in favour of building a future here at home, showing that National’s long-term economic plan is working.

• The New Zealand economy is projected to grow faster than Australia and the UK for each of the next three years.
• 220,000 new jobs are forecast to be created in the next four years.
• Wages are expected to grow faster than inflation over the next four years.
• Stable house prices and lower interest rates have made home ownership more affordable.
• Significant decline in wholesale energy prices in the last two years, supporting a more competitive manufacturing sector.
• Fast Track is enabling investment in energy, mining, manufacturing, housing, and commercial construction, with 32 projects approved so far.

Those factors are helping to reverse the brain drain, with a 14 per cent increase in Kiwis moving back to New Zealand from Australia in the last year. But there’s more to do. National is committed to making New Zealand even more compelling for young Kiwis to build their future. Improving the student loan system for those who choose to stay in New Zealand is a key part of that vision.

Back pocket boost for graduates

Right now, student loan repayments are structured as a tax, paid at 12 cents on every dollar earned above $24,128 until the loan is fully repaid.

For a young graduate, like a nurse or an engineer, compulsory student loan repayments can be one of their biggest weekly costs. A young professional earning $80,000 per year pays around $260 a fortnight on their student loan, deducted automatically from their pay.

These repayments materially increase a graduate’s effective marginal tax rate. A borrower earning $80,000 faces a 33 per cent income tax rate plus 12 per cent in loan repayments, or 45 cents lost from every extra dollar earned. In practice, this often means a nurse working an extra shift, or an engineer taking a risk on a new role at a start-up, will only keep around half of any additional pay.

At the heart of National’s campaign at this year’s election is a belief that Kiwis who work hard deserve to keep more of what they earn.

That is why a re-elected National Government will reduce the compulsory student loan repayment rate from 12 cents to 10 cents in the dollar, allowing interest free loans to be repaid over a longer period of time.

This means that:

• An early career accountant earning $75,000 per year will keep an additional $39 each fortnight, or around $1,000 a year.
• An early career engineer earning $80,000 per year will keep an additional $43 each fortnight, or around $1,100 a year.
• A junior doctor earning $100,000 per year will keep an additional $58 each fortnight, or around $1,500 a year.

Of course, it’s important that student loans are repaid. Many graduates go on to successful careers, with good salaries, so it would not be fair to make other taxpayers heavily subsidise their education, which was the case with Labour’s Fees Free scheme.

Borrowers will also remain free to make additional, voluntary repayments on top of their compulsory repayments, as is the case today.

However, National’s changes will mean that people with student loans who choose to stay in New Zealand will have more money in their take-home pay, often at a time when they are just starting their careers and are earning at the lower end of the scale for their profession.

Read our full Back Pocket Boost for Graduates plan HERE