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August 3, 2014 | by  | in News |
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Un-Arrested Development

Student Loan defaulters residing abroad have so far succeeded in eluding “border arrest”, despite the Government’s tough border policy.

Border arrest warrants can be requested by IRD in order to prevent borrowers significantly overdue on their overseas-based repayment obligations from leaving New Zealand upon their next visit home.

The policy came into effect on 1 April this year, after the Student Loan Scheme Amendment Bill was passed. It gave Police the right to arrest serious Loan defaulters at the border, with potential fines of up to $2000.

Announced in last year’s Budget, the sanction is a component of IRD’s drive to increase compliance of overseas borrowers. This scheme was set into action in 2010, and by the end of June last year had succeeded in scraping back $70.2 million of loans from graduate students. In the year to last month, IRD received another $123.6 million in payments.

Despite this, the default balance owed by overseas-based borrowers at the end of June this year was $683.3 million, an increase on $535.1 million a year prior.

Minister of Revenue Todd McClay said the increase resulted from the IRD’s automatic repayment holiday reducing from three years to a maximum of a year. This meant money in default which had previously been “hidden” is now counted.

Victoria’s Welfare Vice-President Rick Zwaan said the policies surrounding the repayment and interest rates of Student Loans send the wrong message to graduate students.

“It dissuades people coming home with the skills and experiences that are gained from overseas travel and work. Instead of threatening to arrest our top minds at the border, we should be encouraging them to return home and contribute their skills and knowledge here,” Zwaan said.

The IRD has continued to withhold the exact threshold for when somebody is in serious default, saying it could undermine the policy.

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