Student loan defaulter arrested

A student loan defaulter has been arrested when trying to leave New Zealand after a visit here. They have lived overseas since 2004 and are reported to have ignored requests to repay their student loan.

If people living in New Zealand have student loans and earn money they are compelled to repay their loan via Inland Revenue, it is deducted from their earnings.

But many ex-students have left the country and some have avoided paying their loans back. Regardless of views on the student loan system they have taken on a loan that they know they have a responsibility and legal requirement to pay it back.

NZ Herald reports Airport arrest for student debt.

Kiwi living overseas who ignored requests to repay his student loan has been arrested at the New Zealand border after returning home for a visit – the first time the hardline sanction has been used.

The man was detained on Monday while trying to leave the country. He has lived overseas since 2004 and has student debt of more than $20,000.

A law change in March 2014 means student loan borrowers who are well behind on repayments and ignore requests from Inland Revenue may have an arrest warrant issued, stopping them from leaving New Zealand until they resolve their arrears.

This is the first time someone has been arrested under this law.

An IRD spokesman said its powers to arrest at the border were used as “a very last resort”, and followed strenuous efforts to contact the borrower and make repayment arrangements.

Serious defaulters are first contacted to discuss repayment options and are given time to repay some of their loan. Relief from repayments can be granted for hardship reasons, but the man arrested had not made any such application.

IRD generally uses the courts as a last resort when trying to recover tax owed as well.

An arrest warrant can be issued if a court is satisfied that the person has committed the offence of knowingly avoiding student loan repayment obligations, and is about to leave NZ.

A district court can then make subsequent orders that include paying the amount in default, making arrangements for payment, providing security for the payment, not leaving the country without permission, and surrendering travel documents or tickets.

I presume the person arrested was aware of these possibilities, but they chose to return to New Zealand for a visit. If news of their arrest becomes known to other student loan defaulters overseas they are likely to not come back here. But it is also likely them to reconsider their refusal to repay their loans.

The hardline arrest policy has been criticised by the University Students’ Association as likely to make “student loan refugee” into a permanent status, rather than encouraging people to meet their obligations.

But is sounds like they are already ‘encouraged’ to ‘meet their obligations’. If they refuse to do that surely there should be the possibility of consequences.

The option of arrest at the border was modelled on a law that is used to capture people who default on child-support payments. It was designed to target the worst offenders and act as a deterrent to others.

Criminals and alleged criminals can also be arrested if trying to leave the country.

An information-sharing agreement with Australia, expected to start this year, will allow for the exchange of contact details of Kiwi borrowers living in Australia.

Loan defaulters living in Australia will have more difficulty avoiding repayment.

According to the latest student loan scheme annual report, produced by the Ministry of Education, the amount repaid directly by overseas-based borrowers was $184.7 million in 2014/15, up from $158.1 million the previous year.

So many people with student loans living overseas are repaying their loans. And an increasing number of them are repaying their loans. As they should.

Perhaps University should have a compulsory paper – Student Loan Responsibilities 101.