Reduced late payment interest
2014 amendment to the Student Loan Scheme Act reduces late payment interest when a deduction order is made for a borrower in default.
Section 141A of the Student Loan Scheme Act 2011
The amendment reduces late payment interest when a deduction order is made for a borrower in default.
Under section 157 of the Tax Administration Act 1994, Inland Revenue can take deductions from money payable to a taxpayer who is in default of their obligations (for example, deductions directly from salary and wages). This includes being able to deduct from money payable to a taxpayer who has an unpaid amount on their student loan. Individuals subject to a deduction order for tax debts are relieved of some late payment interest.
The previous rules provided a different treatment for student loan borrowers, because there was no reduction in late payment interest when a student loan debt was included under a deduction order.
The amendment makes the treatment of late payment interest for student loans consistent with the treatment for tax debts, and reduces the late payment interest charged on overdue student loan obligations by 2 percent when the debt is under a section 157 deduction order.
The amendment applies from 1 April 2013.