Politics

Student loan border arrests to stay, for now

The policy of arresting student loan defaulters at the border, which saw two people arrested last year, will be kept under review by the Government.

Education Minister Chris Hipkins said while arresting loan defaulters would not have been a policy he would have introduced, for now it would stay as it was not a legislative priority for the Government.

He said it was not a “compelling issue” with only a handful of people being arrested since the Government came to power.

Since 2015, there have been six arrests for people who have defaulted on their student loan repayments. In that time there have been 11 applications for arrest warrants filed by Inland Revenue (IRD).

Two of those arrests happened last year – one in September and one in December, both at the border.

The arrests came after Hipkins told Newshub in July last year that arresting those who have failed to pay back their loan exacerbated the problem.

"I think arrest at the border sometimes exacerbates the situation, because it means those people never come home. Sometimes you're better to get them home then into an arrangement where they can start making payments,” he said at the time.

On Wednesday, Hipkins said the Government had been clear with IRD that an arrest was an “absolute last-ditch, last-case type scenario”.

“It’s not being used over-used, there’s only a couple of cases in the time we have been Government. It is an absolute last resort,” he said.

Providing overseas-based borrowers were in contact with IRD and were making repayment arrangements – even if they were in default – Hipkins said he wouldn’t expect them to be arrested at the border.

A spokesperson for Inland Revenue (IRD) echoed Hipkins, saying seeking an arrest at the border was “an absolute last resort” after IRD had exhausted all other options to get a borrower back on track, and multiple attempts at contacting the borrower had been ignored.

In December 2017, there was a total outstanding balance of $15.5 billion in student loans, with 717,212 borrowers. These are the most up-to-date figures available.

There were 606,490 borrowers based in New Zealand, and 110,722 based overseas. The median loan balance was $15,330, with those based overseas owing more, on average.

Border arrests hit the headlines in 2016, after Cook Islands maths teacher Ngatokotoru Puna was arrested for failing to repay more than $22,000 in student loan debt.

The first step in the Government’s 'fees free' policy took effect at the start of this year, with those starting full-time study or training eligible for their first year free. The policy will be phased in, with two years free from 2021 and three years from 2024.

While the fees free policy will not affect those who already have a student loan, it should mean fewer people will have large student loans going forward.