Students pay back up to $12,000 extra on loans

More than 100,000 New Zealanders have overpaid a total of $6.4 million on their student loans.

The system has been criticised by a students association, which says graduates are overpaying their loans because the system is too hard to understand.

Once the Inland Revenue Department sends them a letter telling them their loan has been fully repaid, borrowers have to change their tax code, stop any extra deductions being made by their employer and cancel any automatic payments.

Inland Revenue figures, released to the Herald under the Official Information Act, show most borrowers who have overpaid have "very small" credit balances - the median balance is $2.57 - and 76 per cent of borrowers (78,280 people) who have overpaid did so by less than $20.

But while Inland Revenue would not give details on the top 10 amounts that people have overpaid, it said all were more than $11,900 in credit.

The department's director of future directions change projects, Katrina Williams, said in the Official Information Act response, that part of Inland Revenue's standard practice was to generate daily and monthly reports that identified borrowers who had overpaid.

After Inland Revenue is satisfied it has received all employer payment reductions, the loan and account information is correct, repayment obligations have been met and the borrower doesn't intend to start a new loan, a letter is sent to the borrower who must:

* Change their tax code to one that does not include the SL repayment code.

* Tell their employer to stop any extra deductions.

* Cancel any automatic payments set up with a bank to repay a loan.

The president of the Auckland University Students' Association, Arena Williams, said Inland Revenue's system needed to be changed.

"Everyone with a student loan has been through hours of fighting with Studylink while they were at university. There's definitely a perception that Studylink deliberately makes it difficult to manage your student loan," Ms Williams said.

"The same applies for grads and the IRD system."

Ms Williams said graduates should be encouraged to pay back their loans, and thought a big part of the problem of people going overseas and not repaying the loans was that it was difficult to pay them back.

"If people know that they're likely to overpay their loans, they'll be even less inclined to pay their loans back. IRD needs a transparent system that's easy to use."