Nicholas Jones is a New Zealand Herald political reporter.

Student loan arrest pricks debtors' consciences

The border arrest of a man over his student-loan debt has contributed to a surge in repayments, Inland Revenue says - with emails and phone calls from borrowers up by more than 50 per cent.

About 20 people who have defaulted on their student loans are being monitored for possible arrest if they return to New Zealand.

In January, Cook Islands man Ngatokotoru Puna, 40, was arrested as he tried to leave New Zealand.

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Student unions criticised the border arrest policy as draconian and likely to make overseas Kiwis "student-loan refugees" - unable to return home for weddings, funerals or other important events.

Over the first two months of this year there was a 31 per cent increase in repayments by overseas-based borrowers, compared to the same period last year, with $7 million more received.

Emails to IRD were up 62 per cent, and phone calls increased by 55 per cent.

Mr Puna, who said his uncle was Cook Islands Prime Minister Henry Puna, was arrested at Auckland Airport on January 18. The Herald revealed the arrest on January 22.

"Inland Revenue believe that the publicity around the first arrest at the border has contributed to the increased activity," Tertiary Education, Skills and Employment Minister Steven Joyce said.

"It's likely that a number of people were spurred into action. It's just a pity that it takes these sorts of steps to encourage some people to meet their obligations to taxpayers.

"There was definitely a much higher level of activity at the start of this year, with Inland Revenue receiving over 20,000 additional repayments compared with last year."

There are 112,390 overseas-based student-loan borrowers, and 70 per cent of them are in default.

Mr Puna, who has lived in the Cook Islands for 13 years and whose $40,000 loan had ballooned to about $130,000, said the IRD sent reminder letters to the wrong address.

He borrowed $5000 from his parents to pay the IRD before it was satisfied he could leave the country.

His arrest was the first time the hard-line arrest policy, passed in March 2014, had been used. It is the harshest in a range of measures to recoup student debt from overseas Kiwis. Last year those based overseas made up 15 per cent of all borrowers, but 74 per cent of borrowers with overdue payments, and had 90 per cent of the amount overdue.

A key measure will come into force in July in the form of an information-sharing agreement with Australia, which will cover contact details of student-loan borrowers living in Australia.

That could see thousands more borrowers receive warning notices. Accurate contact information is crucial, as a district court judge can issue an arrest warrant only if satisfied a person is knowingly avoiding repayment obligations.

The majority of overseas-based student-loan borrowers live in Australia.

Auckland University Students' Association president Will Matthews said he had noticed increased talk about student-loan repayments after Mr Puna's arrest. But scaring people into repayments was not the right approach.

"Students need to be paying off their loans. I don't think that the right way to go about it is by scaring people into thinking they will be arrested at the border.

"These people aren't criminals; they are people who have gone to university or taken tertiary education pathways as a way to better themselves ... More should be done to make sure that students stay in New Zealand."

Speaking about the information- sharing agreement with Australia in Parliament on Thursday, Green Party finance spokeswoman Julie Anne Genter said it didn't make sense to load up people with student debt.

"Why are we putting so much effort into chasing down students ... simply because they got an education here, rather than the estimated $500 million to $1 billion a year we are missing out on because multinational corporates who are operating in this country are avoiding paying tax."

Touching base

31 Inland Revenue has noted a 31 per cent increase in repayments from overseas-based student-loan borrowers over January and February, compared to last year.

50 Emails and calls increased by more than 50 per cent in the same period, and there were 20,000 additional repayments compared to last year.

- NZ Herald

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