Student loan debtor arrested at border, more warrants sought

The hardline policy of arresting student loan defaulters at the airport is likely to face scrutiny next year,. Photo / Doug Sherring

The Government is being urged not to scrap a hardline student loan debt arrest policy, following revelations of a fourth defaulter's arrest at the border.

A change in 2010 under the previous National Government means former students in serious default can be arrested while trying to leave the country or returning from overseas.

New figures showed eight warrants for arrest had been issued as at June 30 and four people had been arrested at the border - one more than previously reported.

Asked whether the controversial measure would be reviewed or abolished, a spokesman for Education Minister Chris Hipkins said the minister will "consider options".

But National Party tertiary education spokesman Paul Goldsmith said that scrapping it would be a mistake.

"If the Government doesn't send a clear signal that it's serious about student loan debt being repaid, it will reverse the hard fought gains we've recently made – the measures introduced by the previous Government prompted an additional $419 million in repayments between 2010 and June 2017.

"Taxpayers help to fund tertiary study and thousands of Kiwis have been and are working hard to pay back their student loans. Just because someone leaves the country, it doesn't mean they should be able to leave their debt behind."

All of the arrested borrowers reached a repayment agreement with Inland Revenue.

Officials say the measure is only used for the most serious defaulters and after repayment requests are ignored or unsatisfactory responses received.

Cook Islander Ngatokotoru Puna, 40, was arrested as he tried to leave New Zealand in January last year - the first time the hardline arrest powers were used since being introduced in March 2014.

Puna, who has lived in the Cook Islands for 13 years and whose $40,000 loan had ballooned because of interest and penalties, borrowed $5000 from his parents to pay the IRD before it was satisfied he could leave the country.

A student loan annual report for the year to June 30 shows that the overdue amount was $1.2 billion in the past year, an increase of 12.4 per cent from 2016.

The increase in both the overdue amount and the average amount outstanding was mainly driven by defaulting overseas-based borrowers. They now owe $1.1b in overdue repayments, compared with the $99m owed by New Zealand-based borrowers.

The student loan annual report also shows the amount of debt wiped because of bankruptcy has risen from $17.6m to $19.9m. Debt written off because of death dropped to $12.6m.

Labour will next year introduce a year of free tertiary or post-school study. Hipkins said the student loan annual report showed students were leaving study with higher debt and taking longer to pay it off.

"Fewer students are going on to study at a post-school level. Students are telling us that they have been put off by higher costs and the burden of debt. It is a worrying trend and robbing too many Kiwis of opportunities and employers of the skills they need."

Student loans

• $1.6 billion - total amount borrowed
• $21,467 - average student loan balance at June 30
• 6.8 years - forecast median repayment time for borrowers who graduated in 2015 and who stay in New Zealand

Source: Student Loan Scheme Annual Report 2016/17