New Zealanders abroad face rising student loan debt


The nearly 77,500 overseas students who are in arrears on student loans should be given more incentive to come home, says Sam Blackmore, co-vice president of the Union of Students’ Associations.

Defaulters owed nearly $1.9 billion in delinquent payments and penalties at the end of June, and the Te Tari Take tax agency believes it knows where less than half are, according to data released under the Official Information Act .

But their debts are mounting as penalty interest of 6.8% is added to the unpaid portion of their loans, and threats of arrest at the border remain.

“I don’t blame them for not coming back,” Blackmore said.

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Faced with labor shortages in many industries, Blackmore said he wanted the government to reconsider its stance on delinquent student loans abroad.

“The stupid thing is they cut off their noses to tease their faces,” he said.

“If we let these people back into the country, they would contribute to taxes, productivity and development.”


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A package to encourage more return would include an agreement to wipe off their arrears, he said.

“You agree to come back, you sign your form, you agree to work five years or whatever, and it’s gone,” Blackmore said.

Treasury Secretary David Parker said the Inland Revenue (IR) commissioner could already offer relief to overseas-based borrowers, which could include removing some or all of the arrears interest added to their loans.

The arrears have piled up because people who go abroad with debt are required to make annual repayments but must actively take steps to make those payments.

Those with student loans who remain in the country will have their repayments automatically deducted from their paychecks.

Nearly three-quarters of overseas student loan borrowers have defaulted, according to StudyLink and IR.

While 10% of student loan borrowers in New Zealand owe $50,000 or more, 20% of overseas borrowers owe that amount.

The top 10 foreign student loan borrowers owe an average of $474,000, an IR spokesman said.

When people leave the country, they are required by law to update IRs with their contact details, but Parker said he was “aware that obtaining student loans from borrowers abroad and staying in touch with those borrowers is challenging.” represent”.

IR was unaware of the whereabouts of 43,071 foreign debtors with total arrears of $1.13 billion.

His records show that there were at least 29,366 delinquent borrowers in Australia, with total arrears of US$610 million.

While penalty rates continued to climb, arrests at the border were rare, and IR said only 13 people had been arrested for overdue student debt in the past eight years, including just one this year and two in each of the past two years.

IR was alerted when a foreign-based borrower returned to the country and tried to contact them while they were here, Parker said.

Treasury Secretary David Parker says people with student loan arrears can ask the IRS to waive some of their penalty interest.


Treasury Secretary David Parker says people with student loan arrears can ask the IRS to waive some of their penalty interest.

“The arrest is a last resort and occurs when returnees do not contact the department while they are here,” he said.

IR had to apply to the courts for a warrant and a stop at the border could only be made if it was believed they were leaving the country, he said.

Blackmore said the low number of arrests seemed to indicate a decision had been made not to arrest people at the border as it would create bad publicity.

The Inland Revenue is aware of 1,714 people with arrears on student loans living in the UK.  They have a combined arrears of $40 million.


The Inland Revenue is aware of 1,714 people with arrears on student loans living in the UK. They have a combined arrears of $40 million.

Blackmore said he understands that arrears forgiveness for returning borrowers may not sit well with everyone.

“When we forgive debt, there’s always going to be a disgruntled populace that feels like they’ve missed something,” he said.

He also called for new rules that could extend the time people with student loans could spend abroad without triggering repayment obligations abroad, from 185 days to 12 months or even two years.

“We want people to be able to get out, learn, explore and come back,” Blackmore said.

IR planned to increase its efforts to find foreign debtors.

“Further work is also planned to identify debtors residing overseas, including those residing in Australia,” the spokesman said.

It had a letter of intent to share information with the Australian Inland Revenue to help them find debtors.

IR also hired collection agencies to track down foreign debtors and collect arrears.

“Interventions range from locating customers and helping them get their repayments going again, to more robust collections activities for those who continue to default,” it said.


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