Is the government allowed to unilaterally change the student loan repayment rate? Wouldn’t I have to sign another contract? What if I refuse?

Question Details: ?

Filed under Welfare/Benefits | 1916 View(s)

Are you a lawyer? Login or register to answer this question.

Answers by Lawyers

Community Law Wellington & Hutt Valley

Yes, the Government is allowed to unilaterally change the student loan repayment rate without you having to sign another contract.

The very first clause of the Terms and Conditions of the current Student Loan Contract says:
"The details in this loan contract may change from time to time as set out in the Act. If there is any conflict between this contract and the Act – the Act will prevail."

The “Act” in this case refers to the Student Loan Scheme Act 2011. The Act itself also provides that it overrides loan contracts.

This means that if the Government amends the Act to alter the loan repayment rate this will apply to all student loan contracts regardless of the repayment rate they specify.

The Act currently sets the repayment rate for New Zealand-based borrowers at 10 cents in each dollar earned over the repayment threshold. The threshold is currently set at $367 per week or $19,084 annually (this threshold is set till 31 March 2015). The Government has stated that from 1 April 2013 the repayment rate will increase from 10 cents to 12 cents. The Terms and Conditions of the Student Loan Contract and the Act mean that this increase will apply to all New Zealand-based borrowers regardless of when they entered into their contract. You do not need to, nor will you be required to, sign an new contract for this increased obligation to be imposed upon you.

You cannot refuse to make to make the increased payments. You would find it difficult to do so anyway, because your employer will simply deduct the higher rate from your salary or wages because they are required to do so by the Act.

Answered 30 May 2012. The IMPORTANT NOTICE below is part of this answer.

IMPORTANT NOTICE: The answer provided above is intended for general informational purposes only and cannot be considered a substitute for face-to-face legal advice. It should not be relied upon as the sole basis for taking action in relation to a legal issue. Laws change frequently, and small variations in the facts, or a fact not provided in the question, can often change a legal outcome or a lawyer’s conclusion. No liability whatsoever is accepted by the authors or publishers of the answer, for loss, damage or inconvenience arising in any way from the use of this site. While each answer has been published by a lawyer with a practising certificate, that person may not necessarily have experience in the particular area of law involved.

For more information about this website, please review our Terms of Use.