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March 17, 2014 | by  | in News |
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Overseas, Overdrawn, Over Here

Students who have seriously defaulted on their student loans will be arrested at the New Zealand border, but the IRD still won’t tell us what ‘serious default’ means.

The Student Loan Scheme Amendment Bill will come into effect on 1 April this year after passing its third reading in Parliament on 6 March.

The policy states that for the most serious loan-defaulters, arrest warrants will be obtained and police will have the right to arrest people at the border. Those prosecuted in court could face a fine of up to $2000.

The IRD has continued to withhold the exact threshold for when somebody is in serious default.

In a Policy Report from 26 July, the IRD stated that publicising the criteria would undermine the policy’s effectiveness by “enabling borrowers to circumvent the criteria, weakening the deterrent effect of the policy.”

Last May, Minister for Tertiary Education Steven Joyce said anyone with loan debt exceeding $15,000 who had not responded to IRD requests for repayment could expect to qualify.

There are 101,095 overseas-based borrowers, who form the majority of all borrowers with overdue repayments. It remains unclear how many will be affected by the policy.

A spokeswoman for Steven Joyce said the arrest policy is targeted towards the worst offenders, “and as a result, we are not planning on making a large number of arrests.”

The police have their own concerns about the new policy. The police statement in the Regulatory Impact Statement (RIS) said that police were concerned about negative “operational and reputational impacts.”

It also suggested border arrests would make police look like IRD debt-collection agents, and added that border arrests would be too difficult given the nature of airports.

Police currently have 37,000 outstanding arrest warrants, and the statement made it clear that student-loan arrest warrants would take a lower priority.

Adding to the arrest-warrant policy, borrowers with loan balances of over $45,000 will have their payment rates increased from 1 April.

Opposition MPs and NZUSA have argued that the changes will lead to lower enrolment figures and higher debt.

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