Five ways to confront student debt
nabbed so far. It’s surprising the taxman doesn’t make examples of people more often: it’s an effective way of jolting nervous overseas-based borrowers into paying up.
No doubt the latest bust forced a few more to confront something they’ve been trying not to think about for years. Perhaps some of them are even reading this article.
If so, here are your options:
The good news is that the IRD is not out to grind your bones into dust.
1. Stall for time
How’s that been working out so far? The IRD is stepping up its efforts; burying your head in the sand will only make things worse.
2. Cut a deal
Typically, overseas borrowers pay 4 per cent interest on their loan balances. But the penalty interest on overdue payments hikes the rate up to 8 per cent, which becomes overwhelming on large debts.
The good news is that the IRD is not out to grind your bones into dust. If you make contact and throw yourself upon its mercy, you may be able to set up an instalment plan and wrangle a reduced rate of 6 per cent.
Unless your debt is very big, or your income is very small, this is the best possible option by far. It will take a long time, and you will have to slash every expense to the bone, but you’ll eventually get your head back above water.
3. Come home
For those not earning much money, consider sloping back home to lick your wounds. The major benefits are that the loan stops racking up interest after six months, and there are no minimum payments or penalties.
Instead, you’ll only pay what you can afford, taken straight out of your pay at the rate of 12c in every dollar. And if you earn less than ~$20,000, you won’t have to make any repayments until you start earning some proper coin.
4. Remain a fugitive forever
You might decide to make a conscious choice to wave goodbye to Aotearoa for good. If you have no ties or family here anymore, and a new life somewhere else, maybe it’s an acceptable sacrifice. But it’s pretty damn sad.
5. Declare bankruptcy
This is the nuclear option. It’s almost certainly the wrong path for most borrowers, as compared to slogging it out the long way. But the promise of declaring bankruptcy is that after a few years in limbo, you’ll come out the other side free again.
Bankruptcy is an irreversible decision, and not to be taken lightly. There are all sorts of financial factors to consider, as well as important ethical and social concerns.
None of these options are especially appealing. But it’s better to rip the sticking plaster off now, rather than live in fear of never being able to come home.
Got a burning money question? Email Budget Buster at richard.meadows @thedeepdish.org, or hit him up on Facebook, where you can also find links to previous Budget Busters.