Student loan defaulters in Oz could face courts

Peter Dunne. File photo / Sarah Ivey

New Zealand student loan borrowers in Australia who told Inland Revenue to "go to hell" could find themselves before the courts.

Revenue Minister Peter Dunne said the Government had been providing incentives such as offering students a three year holiday on repayments while on their OE.

In recent months officials have focused on contacting borrowers based in Australia but now Inland Revenue is getting tough and taking about 10 test cases to court.

"When you have got a $10 billion student loan debt which is projected to grow significantly over the next few years you've got to take stronger measures to get that money paid back," Mr Dunne said.

Overseas debtors owe more than $2 billion. There are about 88,000 of them and 33,800 had defaulted on payments.

New Zealand-based borrowers took an average of just over five years to pay back loans but borrowers overseas took 15 years or more. Borrowers in New Zealand do not pay interest but it kicks in when people go overseas.

"At the moment there are very few sanctions available if someone decides to thumb their nose at the system. People who basically say `I've left New Zealand, catch me if you can,' we will."

Mr Dunne said the Government wasn't looking at taking large numbers of students to court.

"We are not signalling this is going to be an automatic regular process in respect of every borrower, but its those who simply refuse to put it bluntly."

Most people IRD contacted in Australia were happy to enter into arrangements.

"A very small minority have said 'go to hell' and it's that group we are interested in."

Australia was the first focus as it was easier to match data but IRD would look at the feasibility of doing similar pushes in other countries.

Mr Dunne said other countries had not pursued debtors the way New Zealand was attempting.

"We are to some extent charting new ground here, but as I say it is a fairness issue."

The cases would be civil.

- NZPA