The first person to be arrested in this country over excessive student loan arrears is the Cook Islands prime minister's nephew.
Ngatokotoru Puna, 40, will be allowed to leave the country again after making a "significant" repayment, a court heard today.
The nephew of Henry Puna ignored requests to repay his student loan, was arrested at the border on Monday while trying to leave the country. He had lived in Rarotonga since 2004.
After appearing in Manukau District Court on Monday he was bailed to his in-laws' house. Today he was given back his passport and is set to return to the Cook Islands tomorrow morning.
Before telling him he was free to leave court, Judge Blackie asked him what he had learned from the experience.
"I've learned I'm the first person to get arrested," Puna said.
"Let's hope other people know their responsibilities so we don't see others before the court under similar circumstances," the judge said.
Puna, who works for the country's education department, had been invited to New Zealand for a conference. He said the IRD's case was that they had been attempting to call him and send letters but he said that was not the case.
He had been given a $40,000 loan while studying a Bachelor of Arts at Auckland University 20 years ago but said interest had seen it balloon to around $130,000.
He said that he had had to borrow $5000 from his parents to pay IRD before it was satisfied he could leave the country.
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.
Inland Revenue has tracked a small number of overseas-based defaulters but, despite the controversial policy generating headlines, until now no arrest warrant had been issued.
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.
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.
An information-sharing agreement with the Department of Internal Affairs also alerts Inland Revenue when defaulters apply for a New Zealand passport.
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.
The New Zealand University Students Association acting president Laura Harris was concerned by the court case.
"It's really concerning for the large number of these students that want to come home and visit their families and parents, and come to tangis and weddings and funerals. People are going to be scared to come home," she said.
She said that the repayment system was flawed, and should be based on a debtor's income not the amount owed.
"The way that you repay the schemes is based on your student loan and not your income. The system should encourage them to pay loans instead off really harsh penalties."
- by Rob Kidd
