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On January 18, Ngatokotoru Puna was arrested at Auckland airport for not meeting payment requirements on his student loan whilst living overseas. Mr Puna—a mathematics teacher at Rarotonga’s national college—was arrested after refusing to pay the $135,000 debt he had accrued when studying in New Zealand two decades ago. He is the first person to be arrested under sections 162A and 162B of the Student Loan Scheme Amendment Act 2014, which enables IRD to sanction the arrest of an overseas defaulter.
Approximately 16% of New Zealanders are in debt to the government, with the Ministry of Education reporting that students owed $14.2 billion as of June 30, 2014. The National-led financial advisors attempted to tighten the purse strings in the 2013 budget, introducing stricter terms for loan repayments for overseas borrowers whose debt accounts for $850 million.
Provided an application is lodged with the IRD, a student loan debt can remain interest-free if you are living in a country that has a free association with New Zealand, such as the Cook Islands or Niue. In Puna’s case, his Rarotongan residency could have prevented him from being arrested and accruing $90,000 interest had the terms and conditions of the loan been read by him.
Former NZUSA President Laura Harris spoke of the arrest, voicing her concern that “this will turn those who are overseas with student loans into permanent refugees, and do little to encourage further compliance with the student loan scheme.”
NZUSA is urging overseas borrowers to get in contact with the IRD, after being inundated with calls from concerned students. Harris believes that the government is taking too drastic a measure to get their point across, telling media “we’re not disputing that people should pay back their loan, it should just be easier for them, instead of scaring them into not coming home.”
The IRD is adamant that this sanction would only be used if there had been no compliance by the defaulter to make regular repayments, and had been notified by the government department of their financial situation.