Graduates overcharged on student loan debts

By DITA DE BONI

Calculation errors at Inland Revenue mean graduates living overseas may have overpaid thousands of dollars on their student loans.

Student website studentz.co.nz, which published the case of a graduate in Britain who had been asked to pay $9000 more than he should have in his annual repayment, has been inundated with emails from graduates with similar stories.

Although overpaying instalments does not add to a total loan balance - and may, in fact, decrease the total amount of interest paid over time - some graduates say they felt panicked and under pressure to repay amounts that far exceed their incomes.

Graduates overseas are asked to pay one-fifteenth of their student loan balances each year. But it appears students are being asked to pay one-fifteenth of old student loan balances, which are much higher, leading to the overpayments.

And borrowers who do not meet repayments increase their loan debt by 2 per cent of their total each month they are in arrears.

Inland Revenue agrees that it has calculated repayment levels using incorrect loan balances. It says the problem affects fewer than 1000 students who have left the country this year.

But Studentz.co.nz editor Kate Oliver said the responses she had received showed there was a wider problem, and she felt she had been "brushed off" in her quest to understand its scope.

"What they [Inland Revenue] are saying is that overseas students who notice a problem should get in touch with them and sort it out, but they don't seem to be doing anything proactively themselves to try and fix these errors."

Department spokesman John Saunders said the problem was being worked on but he found it "hard to believe" anyone would have had a hard time dealing with Inland Revenue.

He denied anyone had been rude or had "brushed off" people with genuine inquiries.

He said many of the cases assessed were for "relatively small amounts" - or under $100 each - and those affected had been charged roughly 10 per cent more than they should have been.

But dentistry graduate Craig Dotchin, originally from Waiuku and now living in Nottingham, told the Herald that he had "massive" problems trying to explain that he was being overcharged $9000.

He was asked to pay more than $13,000 on a $75,000 loan - almost three times the amount required - and his partner was also overcharged on her $25,000 loan.

"The discrepancy on mine was so large I had to notice it. But I think there might be a lot of students who trust the calculation is right and just pay it automatically, no matter how large.

"For those making good money, that's fine, but not everyone is."

Journalism graduate Danelle Seager was billed $576 three months after she moved to Australia, even though she had no employment in that period.

She has since received bills from the department totalling $3000, with interest of $118 a month.

"With no system set up to make payments, I find having to save up repayments myself, then converting my money to New Zealand dollars, paying $12 to get a bank cheque to make the payment and posting to NZ a pain.

"I also do not receive any correspondence from Inland Revenue to confirm they receive the payment."

More than 17,000 student-loan holders live overseas. They owe on average more than $16,400 each, for a combined debt of $293 million.