Student debtors get hard word from home
Family pressure is prompting more New Zealanders living overseas to repay their student loans.
Government data shows 50,600 overseas-based borrowers made a repayment against their student loans in the 2016/2017 financial year, about 3000 more than the previous year.
They paid a combined $214.8 million, slightly less than the
$216.1m repaid the year before. Inland Revenue is focusing on improving repayments from overseas-based borrowers.
Unlike New Zealand-based borrowers, who have repayments taken from their earnings, people living overseas must make voluntary payments on their student loans.
One IRD tactic is to allow the use of money transfer company OrbitRemit, which accepts payments without fees.
Chief executive Robbie Sampson said his firm collected $8m more in payments in 2017 than in
2016.
The number of overseas borrowers aged between 21 and 24 repaying their debts nearly doubled.
He said more co-operation between Inland Revenue and the Australian Taxation Office to provide better contact information for Australia-based borrowers also helped.
Sampson said payments usually doubled in March and September before the deadlines to avoid penalties.
People with loans between
$15,000 and $30,000 must pay $1000 by September 30 each year and
$1000 by March 31.
If the New Zealand dollar fell against other currencies, borrowers would be encouraged to repay more, he said. OrbitRemit dealt with payments of tens of thousands of dollars – the biggest amount paid was $170,000.
The interest rate for the current tax year is 4.4 per cent. This applies only when borrowers leave the country for more than six months.
Sampson said people were worried about that rate. ‘‘Especially when they hear stories of people who haven’t been paying and they’ve built up a debt with a significant proportion that’s interest.’’
When there was news coverage of student loan debtors arrested at the airport, that prompted a surge in repayments.
There have now been 17 judgments obtained against borrowers in Australia, via their court system.
‘‘We see when something like that happens we get called here by families of people who are overseas with student loan debt.’’
He said those same family members would often encourage borrowers to make payments, worried that otherwise they might not be able to return home.