Few student loan debtors face arrest

Simon left New Zealand six years ago with a student debt of $40,000 acquired over six years at university.

Now working in a beach bar in Cambodia, earning $10 a day, the taxpayer could be waiting a long time for him to repay his debt.

He has not paid back a cent since he left although his parents pay a small amount each month to keep the penalty interest down.

‘‘I wish I could pay,’’ said the 30-year-old. ‘‘I’m not one to run away from my debts and if I hit the jackpot I would pay it all off.’’

Simon is one of thousands of Kiwi student loan borrowers who are living or travelling overseas and not contributing much to the country that gave them their education.

More than 90,000 are in default and owe the taxpayer about $1.2 billion.

Defaulting locals owe only about $100 million.

Inland Revenue, which has the job of collecting the debt, said it knew 70 per cent of the defaulting borrowers overseas were in Australia.

Inland Revenue manager Kerryn McIntosh-Watt said it had no idea where exactly the other 30 per cent were because Inland Revenue had not asked any jurisdiction other than Australia to assist. Inland Revenue has had an arrangement with the Australian Tax Office since 2016.

Inland Revenue can apply to the court for a warrant to arrest student loan debtors at the airport and in the year to June 30, 2017, it obtained five warrants and made two arrests at the airport.

The latest figures show Inland Revenue getting only one warrant in the current year (July 1 to April 30) but no arrest was needed because the debtor made a payment arrangement.

The figures, provided by Inland Revenue in a response to an Official Information Act request, show parents with child support debts are far more likely to be arrested leaving the country than student debtors.

Child support debt ended the 2017 June year at $2.7b but of that $2.1b was penalties. The overall debt still represented the first reduction in 20 years.

As at April 30, total child support debt had again reduced– to $2.36b – of which $1.8b was late payment penalties.

Inland Revenue got warrants to arrest 27 liable parents at the border between April 1 last year and March 31 this year and 13 people were arrested. Of the 27, 26 were male, six were over 50 and several owed money for multiple families.

The parents who were the subject of the 27 warrants owed Inland Revenue a total of $3.9m and paid $170,991 or entered instalment arrangements of $70,000 a year.

McIntosh-Watt said arrests were used only as a last resort and were obtained under different pieces of legislation.

The Student Loan Scheme Act had more onerous criteria for warrants than the Child Support Act.

‘‘As more overseas-based student loan borrowers make contact with Inland Revenue to manage their loans, this consequently reduces the number of potential cases meeting the arrest warrant criteria.’’

Inland Revenue said it had hired an ‘‘external provider’’ to chase 13,000 student loan defaulters in Australia over the past two years.

In the year to June 30, 2017, only one in five defaulters who had been contacted responded.

‘‘I’m not one to run away from my debts and if I hit the jackpot I would pay it all off.’’ Student loan borrower Simon