Student loan holders flock back to NZ from abroad

WELLINGTON: More than 5500 overseasbased student loan borrowers have returned to New Zealand since April, but the Inland Revenue Department will not be tracking those with overdue bills down in managed isolation.

Inland Revenue data shows the total value of all student loans on the Government’s books is $16 billion — and $3.5 billion, or 20%, of all loans are held by people living overseas.

Of the $1.5 billion of debt that the IRD considers overdue, more than 90% is owed by those living abroad — mostly in Australia.

It has been working with the Australian Tax Office to try to track down New Zealanders who owe money, and since 2014 it has also had the ability to arrest overdue borrowers when they try to leave this country.

In the year to June 30, six applications for arrest warrants were submitted, four of which resulted in arrests. That was up from two arrests in the prior year.

Very few New Zealanders are leaving the country at the moment but plenty are flocking back; they must stay two weeks in a managed isolation facility.

An IRD spokeswoman said it had not been approaching people who owed money while in managed isolation.

‘‘Applying for a warrant to arrest someone at the border is a measure of last resort when we have tried all other means to help people meet their loan obligations. The law only allows for us to apply for a warrant when we believe someone with debt is about to leave the country.’’

However, it had seen an increase in repayments.

In the six months to June 30 this year, $209.5 million was paid back, up from $197.2 million in the same period last year.

The IRD spokeswoman said its policy was to wait about four months to send a letter to borrowers returning from overseas.

‘‘When someone who has student loan debt and has been living overseas returns to New Zealand, Inland Revenue sends them a letter around four months after . . . advising them that once they’ve been back in the country 183 days they will be regarded as NZbased borrowers.’’

The IRD was aware that 5570 overseasbased borrowers had returned to New Zealand between April 16, 2020 and September 1, 2020.

In the same time, the IRD sent more than 12,400 letters to returnees about status change.

Many of those who had returned since March 25 were only now hitting that 183 day mark, which triggered the letter.

New Zealandbased borrowers who are salary and wage earners and earn more than $20,020 have compulsory deductions from their pay to repay their loans.

They must repay 12% of every dollar they earn over the repayment threshold. Selfemployed earners must also pay 12% of every dollar earned over the threshold but must organise payment themselves.

New Zealandbased tax resident borrowers do not pay interest on their loans.

Overseasbased borrowers are required to make repayments twice a year based on their loan balance and are charged interest. — The New Zealand Herald