Student loan defaulters to face border arrest

JO MOIR AND JODY O'CALLAGHAN
Last updated 05:00 17/05/2013
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Budget 2013

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Student loan defaulters living overseas can expect to be arrested at the border when harsher penalties kick in next year.

The "last threat option" is expected to start clawing back some of the $400 million now owed by debtors, 80 per cent of whom are overseas borrowers.

"The people this is targeting are those who are the most non-compliant, who are reluctant to pay anything back or respond to attempts to be contacted," Tertiary Education Minister Steven Joyce said yesterday.

The stricter sanctions announced in the Budget would further the return on student loan debt. Between $60m and $70m has been reclaimed since the various initiatives began.

The threshold for border arrest had not been set, Mr Joyce said, but anyone with a debt of more than $15,000 and who had ignored IRD repayment requests could expect to qualify.

About $7 million has been spent on a tracing system by which Inland Revenue works with debt collectors in Australia and Britain to find borrowers and get them before the courts.

"This is working really well, particularly in Australia, where there are 10,000 borrowers, many of which can afford to make payments but aren't," Mr Joyce said.

"These initiatives have a running return where, every $1 we spend, $11 is collected back."

It would cost $600,000 for Inland Revenue to set up the border arrest system for student loans, and those prosecuted in court could face a fine of up to $2000.

"It's the risk of conviction and the effects that would have on further travel and the inconvenience of being turned away at the airport that should deter people," Mr Joyce said.

Labour tertiary education spokeswoman Megan Woods feared threatening border arrest for borrowers would stop the most skilled young Kiwis returning home. "Putting guards on the border will stop people coming back, and that's our most important concern."

The country had seen massive numbers of young people leaving in the past four years, and it was important to encourage them back rather than "scare them away".

Other changes for overseas debtors are higher repayment thresholds and fixed repayment obligations.

From April 1 next year, a borrower with a loan of $30,000 to $45,000 living overseas is expected to repay $3000 a year, while a loan of $45,000 to $60,000 requires a payment of $4000 each year.

Mr Joyce said: "The onus is still on the person to make payments, but nobody would find themselves at border control and have not had anyone contact them about their loan."

Other tertiary announcements included removing student allowances for those aged over 65 from January 1, reducing the student allowance for those aged 40 and over from 200 to 120 weeks of study in total, and extending student loan and allowance stand-down periods for permanent residents from two to three years.

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Greens MP Holly Walker said the changes would see student numbers fall and debts grow.

"It will mean that many New Zealanders will miss out on the opportunity to upskill and retrain mid-career."

Dr Woods said restricting study support for "young" over-40s was consigning them to the scrapheap.

"We live in a world where people are continuing having to retrain, and 40 certainly is not too old to do that."

BY THE NUMBERS

Total student loan debt sits at $13 billion, and is projected to hit $14b – the size of the annual health budget – by 2015.

Of more than 700,000 borrowers, about 101,000 live overseas.

Overseas borrowers owe about $2.67b, of which $411.5m is overdue.

About 58,000 overseas borrowers were targeted in the IRD's three-year repayment drive starting in 2010.

More than $64m has been repaid. 

- Fairfax Media

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