Student loan defaulters face legal action

Legal action is to start against Kiwis in Australia who have not made any effort to repay millions of dollars in outstanding student loans.

Inland Revenue will today start sending letters to Australia-based defaulters, advising them that legal action is being taken as a result of their ongoing refusal to pay up.

The letters are the first step in what will eventually end in court proceedings - and a possible bad credit rating - if repayments are not made, the New Zealand Herald reports.

Tertiary Education Minister Steven Joyce told the Herald authorities would be targeting expats who are "seen to be deliberately flouting their opportunities to pay back" their loans.

People who had "significant sums of money" owing will also be targeted.

"It's about people meeting their responsibilities and that is what's really important, so we will be working on this pretty hard,'' Mr Joyce said.

"People who are based overseas are taking on average 14 years to pay back their debts, and that affects the sustainability of the whole student loan system.

"It's just not fair on taxpayers and it's also not fair on borrowers who remain in New Zealand and pay their debts."

The Government began contacting defaulters in Australia in October, at which time a total of $325 million was owed to IRD in overdue student loans - more than half by people living overseas.

More than $15 million is owed by 3500 expats in Australia, 1000 of whom have been contacted.

Since then $818,392 has been repaid by 243 borrowers who as the result of phone calls and direct letters.

A further $1.09 million has been repaid by 400 borrowers - who were not targeted in the campaign - as a result of separate online marketing.

Mr Joyce said the pilot campaign had been working well and had been extended to the United Kingdom, but it was now time to step things up.

He hoped the message would get through to the defaulters before more serious action was taken. "Ideally people will realise they have this legal commitment and it isn't going away."

If people did not start making repayments, the matter would be moved to court,  probably in Australia.

Defaulters could be ordered to repay or face the consequences, which could include being given a bad credit rating or in a worst-case scenario, bankruptcy.

At the moment defaulters only have to pay back outstanding debt, but Mr Joyce said a bill was currently going through the House which would for the first time allow IRD to recall the whole loan.


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