New student loan fee introduced

Graduating students will be pressed to pay back their loans sooner under new guidelines. File photo / NZ Herald

A $40 annual fee on student loans has been introduced with little publicity, in a move the Government hopes will raise $20 million in revenue.

The fee has come out of the blue for some borrowers while the Union of Students' Associations (NZUSA) has called the lack of coverage surprising.

The administration fee, earmarked by Tertiary Education Minister Steven Joyce in November 2010 and outlined in last year's Budget, came into effect this April.

The fee was passed into law last year as part of legislation to crack down on borrowers avoiding repayments.

A spokesman for the Minister for tertiary education, skills and employment said the fee was introduced as a way of meeting the $57.8m cost of administering the student loan scheme.

The fee covers many of the ongoing costs of administering loans, such as maintaining systems and making updates to loan accounts, of informing borrowers of their current balances and obligations, and of administering the overall student loan scheme.

"This is in addition to the cost to Government of funding an interest-free loan scheme, which is reflected in the 45 cents in every dollar lent that is written down - in total more than $770m in 2011/12,'' he said.

The annual account fee was introduced alongside a $10 increase to the one-off fee to establish a student loan, increasing that fee to $60. The set-up fee had not been increased since the student loan scheme was established in 1992.

Labour criticised it at the time as a revenue-gathering exercise while NZUSA called it an "an unnecessary tax'' on students.

NZUSA president Pete Hodkinson said today that any increase in fees tightened an already tight budget for students.

He said the lack of coverage of the fee was surprising but "in the context of student loans and how massive they're getting a lot of students won't be surprised by an added fee''.

Mr Hodkinson said compared to a debt of $40,000 the fee was a "small amount'' and most students were more concerned with higher repayment rates and cuts to student allowances.

"We've got bigger fish to fry at the moment.''

The $40 fee is not charged in the same year as the $60 Ministry of Social Development establishment fee which is charged when the loan is initiated.

IRD spokesman David Miller said the fee had been charged to more than 510,000 student loan borrowers - bringing in over $20m in revenue.

"To date, we have received nine complaints about the administration fee,'' said Mr Miller.

Prior to the introduction of the fee, borrowers were charged an initial set-up fee of $50.