Govt to chase student loan defaulters

The Government is to get tough on New Zealanders overseas who refuse to pay down their student loans and may use court orders to have them repay their entire debt, as part of a package to reduce the ballooning cost of the scheme.

Labour says it backs the move but opposes another proposal to limit access to the scheme for older students.

Appearing on TVNZ's Q+A yesterday, Tertiary Education Minister Steven Joyce said in previous years the Government and officials had chosen not to aggressively pursue borrowers who left the country - who now owe about 15% of the total debt and about 55% of the overdue debt.

The Government was "not happy about that approach" and had already had some success in Australia where each dollar invested in loan recovery had returned about $4.50 "which is actually pretty good going, and we're now determined to get some more traction there".

That could mean engaging private debt collection agencies, although that was an operational matter for the Inland Revenue Department, which administers the scheme, Mr Joyce said.

However the more aggressive approach would be applied in other countries, including the UK.

In addition to debt collectors, Mr Joyce said the Government wanted the right to recall the entire loan if debtors refused to make payments and it was also seeking reciprocal agreements with tax authorities in other countries to aid collection of loan repayments.

He also said the three-year "repayment holiday" granted to students who left New Zealand would be shortened.

"In a perverse way, it almost encourages you to go if you want to avoid your commitments... Why should those people not have to make a repayment on their loans when New Zealanders at home do have to?

" Mr Joyce said loans to people aged over 55, more than 70% of which is written off because borrowers were already near the end of their working careers, would also be targeted.

Mr Joyce said older students may still be able to borrow for fees but probably not for living and compulsory course costs.

The Government is also taking aim at pilot training, where $30 million a year was being lent to students although few went on to jobs as pilots and more than 60% of their loans were being written off.

The Government hoped to recover "several hundred million dollars" more from borrowers in the next five years with the package said Mr Joyce.

Labour's tertiary education spokesman David Shearer supported moves to recover more money from borrowers now overseas, including reciprocal arrangements with other countries to recover student debt but was critical of the plan to limit loans for older students.

On top of recent cuts to adult education and a fall in extramural student numbers as a result of caps on places at universities, such a measure would not be helpful when the workforce was ageing.

"We need to be trying to encourage people to upskill and retrain and not close off opportunities for them."