General policy statement
This Bill’s purpose is to assist New Zealanders with student loans to save a deposit for their first home. It allows compulsory student loan repayments, or a nominated percentage of the repayments to be delayed and diverted to a first home deposit saving scheme.
New Zealanders working hard after studying deserve to be able to set themselves up with a home before worrying about the IRD claiming back student loans. They deserve to be able to save their own money and buy their first home to take care of their family.
The difficulties of saving for a deposit are one of the main barriers to Kiwis buying their first home and a driver behind declining home ownership rates and increasing rentals dependence. Many younger New Zealanders struggle to save for a first home deposit particularly when 12% of their income before tax goes on compulsory student loan repayments.
Currently borrowers can receive a student loan repayment holiday when travelling overseas for 1 year and it is an issue of fairness that those who stay, work, and save in New Zealand can’t access a repayment break too. This Bill allows student loan borrowers to opt-in to diverting up to the equivalent of 12% student loan repayments into a first home deposit saving scheme. The diverted compulsory repayments can only be withdrawn for a first home or for repayment of the borrower’s student loan. At any point the borrower can choose to transfer the funds back into the student loan account. The saving scheme can be used in conjunction with KiwiSaver withdrawal and the First Home Deposit.
Tertiary education is an investment in the future of New Zealand and New Zealanders and while this change comes at a cost to the Crown from longer student loan repayment lengths it is worth it to help working New Zealanders be able to save their own money to buy their own home.