Indebted students opt for bankruptcy

Last updated 07:27 02/04/2014

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Students at Manawatu tertiary institutes say declaring bankruptcy on a hefty student loan could be a better option than being arrested at the New Zealand border.

From yesterday Inland Revenue has been given the power to seek arrest warrants for people who are now living overseas and who are badly behind with their loan repayments.

Revenue Minister Todd McClay told Radio New Zealand he would be surprised if the number of bankrupt debtors increased as a result, but president of the New Zealand Union of Students' Associations Daniel Haines said that was not what he was hearing.

"It's pretty despicable that people are even considering it and we wouldn't advise any student to go down that path, but the reality is that it is happening."

The union was referring worried debtors to accountants at a rate of about one a week.

"We're incredibly nervous about the fact that students are being pushed to a threshold where they would consider that course of action.

"When you have incredibly aggressive punishments and then the student is weighing up that against bankruptcy, which also has a serious effect on their future, each option seems equally terrible."

The Government has written off about $10 million in student loans in each of the past three financial years because of bankruptcy.

UCOL's student association acting president Miranda Orpin said the changes the Government legislating for were the problem rather than fixing it and more student loan bankruptcies would be a probable outcome.

"It's much less scary and probably less damaging to be able to say that at one time you declared bankruptcy because of a massive student loan than to try to come home and risk going to jail because you missed a payment."

Massey University Students' Association president Linsey Higgins said a system of repayment based on punishment was never going to be as successful as one that encouraged students to repay their loans.

"Enforcing that legislation is going to be a lot of time, effort and cost for the sake of pouncing on students when they come home.

"From our point of view, the cost of that is far more than what it is worth.

"It's not going to end well."

Women in particular, but also men, who were raising children overseas with a New Zealand student loan, often had no way of keeping up with repayments, she said.

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- Manawatu Standard


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