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The Ministry of Social Development is investigating claims of prisoners abusing the student loan system.
National MP Judith Collins has released notes saying that last year the ministry discovered inmates in Whanganui Prison were applying for interest-free student loans from the ministry's Studylink agency despite having no intention of studying.
Prisoners then applied for payment for course-related costs, receiving $1000 each. Some applied for a student allowance as well as a loan, providing a false address outside prison.
Others extended their study loan applications to include a weekly $150 living allowance.
A special taskforce formed late last year to investigate the extent of the fraud had by February this year found that more than 80 prisoners in Whanganui were thought to be involved.
Ms Collins' notes said the Benefit Control Unit had been ready to prosecute two cases involving inmates at Waikeria Prison in the Waikato but was instructed by Wellington to suspend all action.
Cabinet minister Steve Maharey, speaking on behalf of Social Development Minister David Benson-Pope, told Parliament that the matters Ms Collins was referring to had not yet gone to trial but were under investigation so it would be premature to comment.
He said that in the past financial year the number of cases of substantiated benefit fraud had fallen 11 per cent. He added that 95 per cent of benefit fraud cases were successfully prosecuted.
Mr Maharey said that the total overpayments as a result of fraud had fallen from about $41 million to $38 million.
- NZPA
