Govt gets tough with overseas loan defaulters

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The Government is to get tough with New Zealanders overseas who refuse to repay their student loans and may hit them with court orders to pay their entire debt as part of a package to reduce ballooning costs.

Labour says it backs the move but opposes another proposal to limit access to the scheme for older students.

Appearing on TVNZ's Q+A yesterday, Tertiary Education Minister Steven Joyce said that in previous years the Government and officials had chosen not to aggressively pursue borrowers who left the country. They now owe about 15 per cent of the total debt and about 55 per cent of the overdue debt.

The Government was "not happy about that approach" and had already had some success in Australia, where each dollar invested in loan recovery had returned about $4.50 "which is actually pretty good going, and we're now determined to get some more traction there".

That could mean engaging private debt collection agencies, although that was an operational matter for the Inland Revenue Department which administers the scheme, said Mr Joyce. However the more aggressive approach would be applied in other countries, including Britain.

In addition to debt collectors, Mr Joyce said the Government wanted the right to recall the entire loan if debtors refused to make payments. It was also seeking reciprocal agreements with tax authorities in other countries to aid collection of loan repayments.

He said the three-year "repayment holiday" granted to students who left New Zealand would be shortened.

"In a perverse way it almost encourages you to go if you want to avoid your commitments ... why should those people not have to make a repayment on their loans when New Zealanders at home have to?"

Mr Joyce said loans to people aged over 55, over 70 per cent of which was written off because borrowers were already near the end of their working career, would also be targeted.

He said older students might still be able to borrow for fees but probably not for living and compulsory course costs.

The Government is also taking aim at pilot training, where Mr Joyce said $30 million a year was being lent to students, although few went on to jobs as pilots and more than 60 per cent of their loans were being written off.

The Government was hoping to recover "several hundred million dollars" more from borrowers in the next five years with the package, he said.

Labour's tertiary education spokesman, David Shearer, supported moves to recover more money from borrowers now overseas, including reciprocal arrangements with other countries to recover student debt, but was critical of the plan to limit loans for older students.

On top of recent cuts to adult education and a fall in extramural student numbers as a result of caps on places at universities, he said such a measure would not be helpful in the current environment where the workforce was ageing.