Paying back student loans simply a must

It is only a couple of weeks into the year, and already the first student debt-related border arrest has made headlines. A woman who had returned to the country to visit her sick mother was arrested at Auckland Airport while about to fly to the United States, jailed for a night, and was before the court on Monday.

It will undoubtedly add more fuel to the fire for student unions, who argue a “draconian” law change targeting student debt defaulters living overseas has created “student-loan refugees”, who are unable to return home for significant events.

However, it is important to keep the arrests in perspective. Inland Revenue says seeking arrest warrants for student loan defaulters leaving the country is done only as a “last resort after all other avenues have been exhausted”.

Indeed, there have only been nine arrests since the policy was enacted in 2014: three in 2016, one in 2017, two in 2018 and 2019, and the one so far this year. Draconian? Surely not when the department clearly states it has relief options available for those in hardship and struggling to meet repayments. Pushing youngsters offshore and trapping them there? Debatable. Many will be seeking an OE anyway, and jobs are often likely to be higher-paying offshore.

It is true some of the 100,000 borrowers choosing to live and work overseas say the interest repayments that apply to them are crippling, but surely it is right to offer the interest-free incentive on loans to the vast majority of borrowers who choose to remain in New Zealand and work here for the country that has funded their tertiary education and career opportunities?

There is no doubt the amount of student debt and its impact is concerning.

Our Generation Debt series last year contained some stark figures: $16 billion of total student loan debt; 1.3 million New Zealanders who have taken out student loans from 1992 to 2017; more than 700,000 borrowers with outstanding debt; more than 100,000 with overdue debt; some students with individual debt of more than $400,000; and the top 10 outstanding borrowers who collectively owe $4.28 million. The repercussions of that debt are also significant, affecting choices from study and career, to home ownership and childbearing, to country or area of residence, and contributed to mental health issues. Hundreds have declared themselves bankrupt.

Yet official OECD figures show the scheme has been worth it, as the investment pays off.

It is also apparent some former students have been thankful for the scheme and the lives it has provided them. Many have, and are, paying off their loans through good management, hard work, and sometimes better-paying jobs gained as a result of their studies and careers made possible by the loans.

When so many are working hard to meet their repayments, it would be wrong to overlook those who are not doing the same. The overall incentive to pay back money borrowed must be encouraged. No one should be above the law.

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