Student loan defaults break $1 billion mark
Expatriate Kiwis failing to repay their student debt have helped to 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 $1,073,815,786, new figures show.
The data, released by the Inland Revenue Department (IRD), revealed that 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.
‘‘So far, an additional $327m has been repaid as a direct result of that programme. Without it, the overdue debt would be well above $1.3b by now,’’ he said.
IRD principal adviser, business owner team, Sara Engel, said the organisation was using a number of methods to recover debts. These included making it easier for people to make repayments from overseas, and better informationsharing with other government agencies.
Legal action or arrests were a ‘‘last resort’’, she said. 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, back in January, followed by the arrest of a woman at Auckland Airport in June.
Next month, an information-sharing arrangement between the IRD and the Australian Tax Office will come into effect, allowing the IRD to ask for the contact details of tardy borrowers in Australia.
Joyce said the use of debt collectors in Australia and Britain had helped to 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 borrowers when they go overseas.’’
Labour’s education spokesperson, Chris Hipkins, said breaking the $1b mark showed that the Government’s hardline approach had failed, and it had to make it more enticing for people to stay and work in New Zealand.
‘‘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,’’ Hipkins said.
New Zealand Union of Students’ Associations president Linsey Higgins said the 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,’’ Higgins said.
Overseas borrowers not on a repayment holiday are required to make two repayments each year towards their loan, with the next due date approaching on Friday.
Paying on time means borrowers avoid late payment interest. The current interest rate is 4.8 per cent.
Higgins called for the Government to consider loosening the rules to allow borrowers to go on their OEs. Currently, interest starts accruing after a borrower spends six months outside the country, but she wanted the threshold extended to three years.