4 Jun 2016

Student loan arrests too harsh, govt told

3:58 pm on 4 June 2016

Student groups want the government to stop using what they call draconian techniques to get people to repay their student loans.

Student loan sign

Seventy percent of the more than 100,000 overseas-based borrowers are currently defaulting on their student loans. Photo: 123RF

The Inland Revenue Department has said a woman was arrested at Auckland Airport this week for defaulting on her student loan.

The woman was arrested as she tried to get onto a flight to Australia, and Union of Students Associations president Linsey Higgins said that was criminalising an issue that could be dealt with more simply.

Ms Higgins said the repayment scheme for borrowers who were overseas should be tied to their income, not calculated as a percentage of the loan.

Seventy percent of the more than 100,000 overseas-based borrowers are currently defaulting on their loans.

Inland Revenue and the ministers responsible could use the rules to support borrowers make their repayments, Ms Higgins said.

"We think that it should be focused toward paying off that principal, and supporting people to pay that off. And actually looking at wiping the interest in some of these instances because it's not helping the situation," she said.

"We would be delighted to work with the ministers to see this happen."

Ms Higgins said some former students were now stuck barely paying back the interest.

"The student loan scheme has failed if it traps borrowers into spending their lifetime paying back interest on a loan," she said.

She said the union supported the Labour Party's policy of free tertiary education.

Tertiary Education Minister Steven Joyce said an arrest was a last resort after Inland Revenue repeatedly tried to get in touch with the borrower.

He said students had an obligation to repay their loan so the scheme could continue to support future generations of students.

Mr Joyce says Inland Revenue was monitoring about 20 people for potential arrest at the border.

This week's arrest follows that of Cook Islands maths teacher Ngatokotoru Puna, 40, who was detained for failing to repay more than $22,000 in student loan debt in January.

That was the first time Inland Revenue had used its power to detain a person with an unpaid student debt, and the department said it resulted in a rise in payments from overseas borrowers in January and February.