The Government's tough new student loan rules are an attempt to claw back more than $427 million of debt in default from overseas-based borrowers.
New figures from the Inland Revenue Department show that borrowers based overseas make up 15 per cent of those with student loans, but account for 60 per cent of 84,562 defaulting borrowers. The top 20 defaulters living in Australia collectively owe more than $1.6 million in default, with each borrower owing more than $47,000 in arrears.
Changes announced in the Budget will see passport information matched with information on student-loan debt, meaning that defaulters could be arrested as they try to leave the country.
Fixed repayment obligations and higher repayment thresholds will also be introduced from next year.
Minister of Tertiary Education Skills and Employment Steven Joyce said the crackdown was aimed at the worst offenders.
Those who fell behind on payments but were responsive to the IRD would not be cuffed at the border, which would be a last resort. "This is for people who are deliberately not paying and don't want to talk about it."
The NZ University Students' Association has said the new rules needed to be complemented by making the repayment process easier. It said the IRD website could be confusing and anti-intuitive, meaning many borrowers would be unable to find help such as mechanisms by which fees-free bank transfers could be made from overseas.
But Mr Joyce said such criticisms weren't up with the play. "It was definitely true when we started down this path a couple of years ago - it was quite hard to pay, which is one of the reasons we took a couple of other steps before taking these ones."
Defaulters living in Australia will come under the most pressure. The Government plans to use a private debt collection agency to track about 10,000 borrowers who have made "little or no effort" to repay debt. That group have a student loan balance of $300 million, with $100 million overdue.
As at March 31, 2013, $13.5 billion owed by student loan borrowers.
Overseas-based student loan borrowers:
• make up 15 per cent of the borrowing population (107,023 out of 714,942).
• make up 60 per cent of the defaulting borrowers (50,586 out of 84,562).
• are responsible for 82 per cent of the amount in default ($427.3m out of $520.4).
With respect to the group of 10,000 borrowers in Australia whose details have been provided to a private sector debt agency:
• their total student loan balance owed is $300 million.
• their overdue student loan amount is $100 million.
• of the $100 million overdue student loan amount, $90 million is owed by 7400 borrowers who have been in default on their loan for the past three tax years at least.
• the top 20 defaulters in this group collectively owe over $1.6 million in default, with each borrower owing more than $47,000 in arrears.
As at April 30, 2013, there are more than 2,200 overseas-based student loan borrowers whose loan balances are over $100,000.