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August 2, 2015 | by  | in News Splash |
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Defaulters on borrowed time

Last week Tertiary Education Minister Steven Joyce and Revenue Minister Todd McClay announced that the Inland Revenue Department is monitoring 20 overseas student loan borrowers who could be arrested.

The arrest of loan defaulters was made possible under the Student Loans Amendment Bill (No 3), which was passed in 2014.

The Act makes it a criminal offence for overseas-based borrowers (OBBs) who knowingly fail to pay, or refuse to make any efforts to pay off their loans.

The Government also announced in February of this year that it would share information with Australian tax officials in an effort to annually recoup overseas debt.

In what can only be described as a dad-like telling off, Joyce and McClay stated, “Inland Revenue will be getting a fresh stream of contact information on borrowers living in Australia so now is the opportunity for defaulting borrowers to sort out their loans with Inland Revenue.

“They shouldn’t have to wait for IRD to contact them. For those defaulting borrowers who don’t call, their contact details will start coming in from next year and Inland Revenue will follow these up” the dads said.

According to Joyce, “the New Zealand taxpayer helped to fund their education and they have an obligation to repay it so the scheme can continue to support future generations of students.”

Joyce, who attended university in the early 80s, had his tertiary education funded more or less entirely by the New Zealand taxpayer.

The 2014 Student Loan Scheme Report cited overseas-based borrowers as having a “much lower repayment compliance and slower repayment times than New Zealand-based borrowers”.

While OBBs are still expected to pay their loan, interest is also charged on student loans when a person has been living overseas for 184 days (around six months) or more.

Salient spoke to one OBB who said that “seeing as most NZ travellers who come to the UK are only on a two-year visa anyway, I think the interest-free time threshold should be increased to two years.”

The borrower admitted that “you do have to be self-motivated and proactive when it comes to IRD because they will not help voluntarily”.

Another student Salient spoke to has been working and travelling overseas nearly continuously since graduating in 2012, but remains a New Zealand-based borrower. She has avoided accruing interest on her loan by returning for short periods every six months.

“The Government tells me that as long as I spend no more than 183 consecutive days away from NZ and am back for at least 32 days in between stints away, I will remain a ‘NZ based borrower’,” she said.

“With living costs in NZ being amongst the highest in the world, compulsory payments for overseas based borrowers with my loan balance now being $7000 per year and interest accruing per month being in excess of $400, it is cheaper for me to spend most of my time overseas and fly home every 183 days.”

In 2014, the number of overseas-based borrowers had reached 721,437 with their overdue payments amounting to $683.3 million.

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