Students’ loan debt passes $1b

Expat Kiwis failing to repay their student debt have helped drive the amount owed in default payments past the $1 billion mark.

The amount owed in defaulted loan payments reached the milestone in April, and by the end of June had reached reached $1,073,815,786, new figures show.

The data, released by the Inland Revenue Department (IRD), revealed the top 10 biggest debtors owe more than $300,000 each and are all based overseas.

Just over $982 million of the bad debt is spread across 80,622 offshore borrowers while the remaining 24,108 debtors live in New Zealand.

But Tertiary Education, Skills and Employment Minister Steven Joyce credited initiatives to combat loan defaulters with delaying the arrival of the $1b mark.

‘‘The $1b mark has taken longer than expected to arrive because of the new overseas-based borrower initiative,’’ he said.

‘‘So far, an additional $327 million has been repaid as a direct result of that programme. Without it, the overdue debt would be well above $1.3 billion by now.’’

IRD principal advisor business owner team Sara Engel, said the organisation was using a number of methods to recover debts. That included making it easier for people to make repayments from overseas and better informationsharing with other government agencies like the Department of Internal Affairs.

Legal action or arrests were as a ‘‘last resort’’. So far, just two people have been taken into custody at the border.

The first was Ngatokotoru Puna, nephew of Cook Islands Prime Minister Henry Puna, in January, followed by the arrest of a woman at Auckland Airport in June.

Next month, an informationsharing arrangement between IRD and the Australian Tax Office (ATO) will come into effect allowing IRD to ask for contact details of tardy borrowers in Australia.

Joyce said the use of debt collectors in Australia and Britain had helped boost repayments.

‘‘The IRD is currently collecting $22.20 for every $1 invested in collection,’’ Joyce said.

‘‘We are now much more proactive in keeping up with

Labour education spokesman Chris Hipkins

borrowers when they go overseas.’’

Labour education spokesman Chris Hipkins said breaking the $1b mark showed the Government’s hardline approach had failed.

‘‘In some cases they’re not finding work that utilises their skills or that pays what they can get offshore, so they head overseas. That’s a waste of talent.’’

Supporting people to repay the loans, rather than penalising people, should be the focus, he said.

‘‘Of course, people who have student loans should pay them back, but the very punitive approach being taken . . . is actually discouraging people from coming home.’’

New Zealand Union of Students’ Associations president Linsey Higgins said IRD employed ‘‘a lot of scare tactics’’.

‘‘It’s not fixing the problem of the defaulters. It’s just making the good people more scared.

‘‘There are people who get to that stage where [paying back their loan is] just an insurmountable beast.’’