National would cut the compulsory student loan repayment rate from 12 cents in the dollar to 10 cents from 1 April 2027, and add a percentage point to the interest charged on borrowers who have moved overseas, under a policy the party announced in Auckland on Sunday.
Finance spokesperson Nicola Willis released the policy alongside party leader Christopher Luxon at Rocket Lab, a little over two months out from the 7 November election. In the party’s statement, Willis said repayments were a heavy load on people at the start of their working lives.
“Right now, compulsory student loan repayments are paid at 12 cents on every dollar earned above $24,128. It is often one of the biggest weekly expenses for a young graduate,” she said.
“Reducing this to 10 cents means an accountant starting out in their career and earning $75,000 per year would keep an extra $39 a fortnight, or around $1000 a year.” A junior doctor with a student loan earning $100,000 a year would keep an extra $58 a fortnight, or $1,500 a year, she said.
The cut is forecast to cost $438 million over five years, most of it a one-off $283 million write-down of the existing loan book in the 2026/27 year, 1News reported. No debt is forgiven under the policy. Borrowers would still repay every dollar they owe, only more slowly. The write-down is an accounting figure rather than cash out the door, because loans are interest free for people living in New Zealand, so money repaid in later years is worth less to the Crown today.
The second half of the announcement points the other way. National would add 1 per cent to the annual interest charged on overseas balances, taking the rate to 6.6 per cent, with tiered penalties for sustained default on top of existing late payment interest. People who move overseas permanently and withdraw or transfer their KiwiSaver would have those funds used to clear any student loan first. The party would also lower the threshold for a border arrest warrant so one could be sought for serious, sustained default without having to prove the borrower knowingly refused to pay.
“Overseas-based borrowers currently account for 93 per cent of overdue student loan debt. Only around three in 10 meet their repayment obligations in a given year, compared to 95 per cent of New Zealand-based borrowers,” Willis said.
Inland Revenue’s own tables back that number up. At 31 March 2026 there were $2,663 million of overdue student loan repayments, of which $2,478 million was owed by borrowers living overseas. That is 93 per cent. Of the 114,724 people with a loan who were living overseas, 84,272 had a repayment overdue, or roughly three in four.
What the numbers also show is how modest the recovery target is. National expects the tougher overseas settings to bring in about $15 million a year in net recoveries. Set against $2,478 million already overdue from that group, a full year of the new penalties would claw back about six tenths of 1 per cent of the pile.
The scheme is large. Inland Revenue counted 631,310 borrowers at 31 March 2026, 516,586 of them living in New Zealand. The nominal balance owing was $16.8 billion, up 3.8 per cent on the year before, with $12.4 billion of it held by people at home and $4.5 billion by people abroad. The median balance was $18,302.
Luxon told reporters the change would leave people with “real money in their back pockets” and encourage them to stay and work here. “We’re talking about teachers, we’re talking about young engineers, we’re talking about young doctors, people who are contributing to our community who will repay their loan over time, but we’re easing up on it, giving them a bit more breathing space in those early years,” he told RNZ.
Labour’s tertiary education spokesperson Shanan Halbert said the policy undoes something National itself put in place. “National increased the student loan repayment rate from 10 to 12 percent in 2012. Now, more than a decade later, its big election-year announcement is to reverse that decision,” he said in Labour’s response. The higher rate was announced in the 2012 Budget by the National-led government of the day and took effect on 1 April 2013.
“Any relief for graduates will be welcome. But young people will judge National on its whole record,” Halbert said. “National has allowed back-to-back fee hikes of up to 6 percent and is proposing another next year. That would allow fees to rise by up to 19 percent over three years. They’ve also frozen the student loan repayment threshold so around 370,000 borrowers have to repay their loans faster.”
That freeze is real and it is permanent. Budget 2025 papers record a Cabinet decision to suspend inflation adjustments to the $24,128 threshold indefinitely, saving the Crown $65 million over four years. So the 10 cent rate, if it happens, would sit on top of a threshold that no longer rises with the cost of living. Every year of wage growth pulls a little more of a borrower’s income into the repayment zone.
Victoria University Students Association president Aidan Donoghue was unimpressed. “Our initial response is a solid ‘meh’. For students this is a step in the right direction, however it isn’t much of a tangible change. The savings are zero, in the long run you are still paying that money back, and it means you’re just kicking the can down the road in terms of repayment,” he told RNZ.
He was also doubtful the overseas penalties would keep anyone home. “If you’re going to a nation that already has much higher wages or conditions, that offsets that factor of the increased interest. We are concerned that we may lock students and graduates out of the country for fear of being arrested if they do fail to make their payments. It’s a bit of a balancing act,” he said.
For voters, the practical question is a narrow one. Roughly half a million New Zealanders have a loan, and for those earning above the threshold the policy is worth somewhere between nothing and a few hundred dollars a year, depending on income, arriving in April 2027 at the earliest. Whether that is enough to change anyone’s mind about staying is the part nobody can cost.
If you want to see how the parties line up on this and other policies before you vote, our voting tool lets you compare them side by side.
Would a lower repayment rate make a difference to you, or is the bigger problem the size of the loan in the first place? Tell us what you think in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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