Student loan defaulters could be arrested at border

Student loan borrowers who have defaulted on their repayments could be arrested at the border under new sanctions in Budget 2013 in a drive to increase student loan repayments.

Minister for Tertiary Education, Skills and Employment Steven Joyce will target overseas-based student loan borrowers by introducing fixed repayment obligations and higher repayment thresholds.

Changes to student loans and allowance would save the Government $29.6 million.

Mr Joyce said a private debt collection agency in Australia would be used to assist them with borrowers in default in the country.

"This tracing activity involves a group of 10,000 borrowers, believed to be in Australia, who have made little or no effort to repay their debt, or even make contact with Inland Revenue,'' said Mr Joyce.

The Government will extend child support border arrest sanctions to non-compliant overseas based borrowers with high levels of default on their student loan repayments.

Mr Joyce said nearly half a billion of debt was owed by overseas-based student loan borrowers.

He said the measure were not harsh.

"It would only be for the people who are deliberately and refusing take any notice.

"We are talking about people that have been contacted by IRD and are refusing to act and then effectively deliberately defaulting.''

The Inland Revenue Department will put in place an ongoing information sharing agreement with Internal Affairs to collect contact details from passport applications.

The Government say under the new rules an overseas borrower with a $20,000 student loan balance will pay their loan off in 15 years, compared to over 35 years under the current system.

Under new rules the interest they pay would be $8425 - compared with $19,940 under the existing rules.

Mr Joyce said The Government had already made progress with overseas-based borrowers.

"It's time to up the ante to ensure they take responsibility for their loans and meet the obligations to taxpayers.

"Overseas-based borrowers are continuing to let the side down with slow repayments and high levels of loan defaults, compared to those who stay in New Zealand and pay off their loans.''

Mr Joyce said the cost to the taxpayer had reduced from 48 cents in the dollar in 2009 to 39 cents in the dollar in March this year.

Revenue Minister Peter Dunne said since IRD's programme to rein in overseas-based borrowers debt, almost $60 million had been collected.

He said previously around 14 per cent of overseas-based borrowers did not meet the interest charged on their loans.

New rules for overseas borrowers:
Loan Balance Amount to be paid per year
$1000 or less:            The whole balance
$1000-$15,000:           $1000
$15,000 - $30,000:      $2000
$30,000 _ $45,000:      $3000
$45,000 _ $60,000:      $4000
greater than $60,000:   $5000


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