Students owe $187m as amnesty takes effect

Friends and family are being urged to act as unofficial tax collectors as Inland Revenue tries to recover millions from New Zealanders living overseas and not repaying student loans.

From Saturday, a year-long amnesty for people behind in paying off their student loans begins.

Inland Revenue student loan programme national design manager Andrew Minto said tax collectors knew that many of those whose loans were in arrears were overseas and it would be difficult to get the word out to them about the amnesty.

"We will be advertising on websites, but we will largely be relying on friends and family to advise them of the amnesty," Mr Minto said.

Most of the advertising would be in New Zealand, with the IRD banking on parents and friends telling their loved ones overseas about the scheme.

Inland Revenue believes 44,000 defaulters living in New Zealand owe $76 million. The almost 11,000 living overseas owe $111 million.

The amnesty would see them avoid financial penalties for defaulting.

"When people go overseas their student loan probably isn't the highest of their priorities," Mr Minto said.

He hoped the amnesty would encourage people to make an effort to repay their loans, but said he could not put a figure on what proportion of the outstanding debt might be recovered.

Borrowers need to apply for amnesty, and give an undertaking to keep up repayments for two years from the acceptance of their application.

The amnesty is one of a pair of significant student loan changes which come into effect tomorrow. As of April 1, student loans will be interest-free to borrowers living in New Zealand.

Mr Minto stressed that students did not need to take any extra steps to ensure interest on their loans was written off.

The IRD would do so automatically on March 31, 2007, and at the end of each tax year thereafter.


Interest-free student loans

* Borrowers will be entitled to an automatic write-off of all interest charged on their loans from tomorrow. Borrowers do not need to apply.
* All borrowers living in New Zealand for six months or more, whether studying or not, are eligible.
* Borrowers can travel overseas for up to six months without losing eligibility.
* Borrowers who travel overseas, without exemption, for more than six months lose eligibility.
* A year-long amnesty for borrowers who are behind in their loan payments also starts on Saturday.