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Overseas Kiwis struggling with massive interest and penalties on unpaid student loans
A former IRD prosecutor is calling for changes to the student loan system so that Kiwis living overseas aren’t put off coming home because they’re worried about being arrested at the border.
In April, interest rates for overseas borrowers were lifted from 3.9 percent to 4.9 percent and the late payment interest rate for all borrowers to 8.9 percent.
Tax barrister Dave Ananth said this is putting people off returning to New Zealand at a time we should be encouraging skilled people to come home.
A pilot who’s been living in Australia for over 10 years has racked up a whopping $170,000 in student loan debt, most of it being interest.
After completing his training in 2014 he struggled to find work in Aotearoa, so he headed across the ditch, where he worked as a commercial pilot for six years.
Kiwis worried about arrest over student loan debt crackdowns
When the Covid-19 pandemic hit and overseas travel all but ground to a halt, he was forced to take a low-paying job in a storage warehouse meaning he struggled to meet his loan payments.
The pilot, who Checkpoint has agreed not to name, has since resumed flying for a regional carrier, but worried about an uncertain job market and whether he’d ever pay off his loan.
“This loan becomes an ongoing – it becomes a burden and it’s not the fact the size of it. There’s just no pathway forward as it currently stands.”
Checkpoint’s also spoken to a woman who was unable to come home to see her sick mother as she was scared, she’d be arrested at the border.
When she moved to the United States 20 years ago, her student loan debt was around $15,000. That had ballooned to close to $70,000.
“When they told me how much penalty fees that I had and that was 10 years ago when I first found out about the penalty fees and that was more than my initial student loan and interest combined, I just was deflated.”
She received emails from IRD threatening legal action if she didn’t pay, but she said she couldn’t afford it.
“You may think, ‘oh no, I’m just going to go to a different country and make all my money there’.
“But at some point, in time, when you’re older, you’re going to want to go back to your roots and see family and friends. I just screwed that up for myself.
“Just don’t get yourself in this situation like so many of us have where you can’t even go home and see family when they’re ill.
“I’ve been petrified something’s going to happen to my mum and she’s going to pass away and I’m not even going to be able to go there.”
After getting legal help from former IRD prosecutor Dave Ananth, IRD agreed to wipe the penalty fees so she now need only pay the original $15,000 loan and interest.
Ananth, who’s a tax barrister with the law firm Stace Hammond, agreed there should be penalties for failure to pay but said these should be looked at on a case-by-case basis.
“A lot of them are telling me I’ve not heard from IRD for the last 10 years, but IRD’s perspective is it’s your obligation, you should contact.
“[It’s] that sort of ‘Who should contact? I’m away, you haven’t rung me, there was no emails’, that sort of thing. I think both sides need to come to the table.”
He also wanted better communication between IRD and the student debtor.
“There should be a bit of leeway to say, ‘Hey, okay you come in, but come back and talk to us and see whether a hardship application can be made, whether you can pay a few $100 for a start and then we can see how you go’.”
“For a lot of them because the loan has been taken, 15, 20 years ago they’ve got their head buried in the sand, they don’t want to deal with it. So, it creates a lot of anxiety, creates mental stress for a lot of people.”
In the year to March, there were about 80,000 overseas-based student loan borrowers with overdue repayments – that’s an increase of 10 percent on the year before.
In total they owed $2.3 billion.
Ananth said many people had found the grass wasn’t greener overseas.
“Everyone doesn’t go overseas straight away and then lands in this cushy, $200,000, $300,000 job.”
He said people working in healthcare, technology, and engineering should be prioritised to help plug gaps in the job market here.
Inland Revenue said between 23 January and 7 February this year they had emailed 3502 borrowers with overdue repayments telling them they’re being monitored, and that enforcement may be taken against them.
That could include being arrested at the New Zealand border.
But it said border arrests were a last resort, and it would work with people before taking legal action. One borrower in default had been arrested in the past year.
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The chief executive of the Parliamentary Service is confident there will be enough room to accommodate the increased number of MPs and their staff coming into Parliament.
On current numbers, up to 131 MPs could be sitting in the Chamber following the election, brought on by a record overhang result.
Clerk of the House of Representatives Dr David Wilson told the Spinoff that currently the debating chamber had enough chairs to seat 124 MPs – including the Speaker of the House – and work was being done to accommodate more by altering the seating arrangement.
In a statement, Parliamentary Service chief executive Rafael Gonzalez-Montero said planning for a larger Parliament had been going for “some time”.
“Now that the election results have confirmed an increase to the number of members we are looking at several options.
“We are confident we will be able to accommodate all members within the Chamber.”
VNP / Phil Smith
Gonzalez-Montero said office accommodation for members and their staff would be “stretched” for a short time, but the new Members’ Building was only a few months away from “practical completion”.
That building – located behind Parliament – was due to be ready to occupy in April next year and had capacity to accommodate around 30 backbench MPs.
“All members should be in fit-for-purpose accommodation from that point,” Gonzalez-Montero said.
Following the 2023 election, 123 MPs sat in the Chamber – a record number at the time. That decreased to 122 following the resignation of National MP Judith Collins.
Collins held the seat of Papakura and stepped down in May and Parliament voted against holding a by-election because it was too close to the election.
The election result also meant high-ranking National Party MPs like Chris Bishop, Paul Goldsmith, Nicola Willis and Gerry Brownlee – Speaker of the House and an MP for 30 years – would likely not make it back into Parliament.
Only resigning or retiring MPs were permitted to give a valedictory speech meaning none of them would get the chance to give a valedictory statement.
Asked if their would be special allowances for valedictories, Wilson said in a statement that normally only MPs were allowed to speak in the House but the House could suspend its own rules or temporarily alter them.
“It could do so to allow former members to address the House.”
Wilson said no such arrangements could be made until the next Parliament opened and members sworn in.
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