Students moving abroad risk arrest for loan defaulting

New Zealanders with student loans now run the risk of arrest if they move overseas and get behind on their loan repayments.

From 1 April, the Inland Revenue Department gained the power to seek arrest warrants for overseas-based borrowers with significant arrears.

The warrants can be executed when people seek to re-enter or leave the country, and are part of a series of moves by the government to increase repayments.

Revenue Minister Todd McClay says arrest warrants are a last resort, but people must expect to repay their loans.

"Inland Revenue at all times will look to work with people to try and sort their loans out, but ultimately they have an obligation to the New Zealand taxpayers. There are 61,000 people who live overseas who have borrowed NZ$3 billion [US$2.6 billion] from the taxpayer and they are in arrears by NZ$544 million [US$471 million]."

But critics say the arrest powers will have little impact.

The president of the New Zealand Union of Students' Associations, Daniel Haines, says many New Zealanders living overseas will be able to dodge arrest.

"Of those graduates living overseas, 40% are eligible for a passport under a different country so if they return to New Zealand with an Australian or a British passport... they are lost to the system," he says.

Haines says other students will be too scared to return to New Zealand.

"The system encourages this culture of fear where they're afraid to return to New Zealand and we lose both the economic investment that was made in them and the cultural diversity that they were exposed to by living overseas."

There are also signs that more students will become bankrupt in order to avoid paying off their loans.

The government has written off about NZ$10 million (US$8.6 million) in student loans in each of the past three financial years because of bankruptcy.

Last year, that happened in 422 cases and Haines expects that figure will increase because bankruptcy in New Zealand will have little impact on people living in other countries.

COMMENT

Absolutely disgusting!

Christopher Weir on the University World News Facebook page