Student loan pain: IRD owed over half a billion dollars in Tauranga

Magnus Fraser says his student loan was an investment in his future. Photo /Andrew Warner

Student loans are a way of life for those wanting to take on most forms of tertiary education. But as Carmen Hall reports, some people may be racking up big bills to prepare for careers it turns out they don't want after all.

The Inland Revenue Department is owed more than $557 million in student loans from Bay residents and one recruitment agency says it is inundated with graduates who can't get a job in their chosen field.

Others had simply changed their minds about their career pathway after racking up tens of thousands of dollars in debt.

Data supplied by the IRD reveals 29,200 people with a Tauranga postcode - also covering Whakatāne, Edgecumbe, Katikati, Kawerau, Ōpotiki and Te Puke - owe on average $19,091.15 each. The total amount was $557.4m.

1st Call Recruitment managing director Phill van Syp says some graduates were working in other fields after racking up student loans. Photo / File

1st Call Recruitment managing director Phill van Syp said big loans were a common theme in his line of work.

''It happens all the time it's really, really sad. We have highly educated people who clock up these huge loans and can't get a job in the industry.''

''Or else they decide 'I don't love this' or it's... not all fun and games.''

He advised people to get some real, solid work experience before committing to a student loan.

''You want to get your feet in the field because what you think it is and what it really is, is two different things.''

Magnus Fraser has been studying a double major of law and art history. Photo / Andrew Warner

University of Waikato student Magnus Fraser has been studying a double major of law and art history and owes about $60,000 to the IRD.

"Money was not a factor when I decided to study as I saw it as an investment in my future, but my parents have to help me with my living costs."

The 23-year-old said realistically he hopes the debt will be paid off by age 40 but would love to see it done sooner. He was working at AFFCO meatworks in Te Puke to set him up for the university year ahead.

"It is definitely stressful, it is just accumulative debt that adds more weight to debt that I could potentially have if I want to buy my own home.

"There are other options when you leave school, which I looked into, but the things I enjoyed all lined up for me to go to university."

As an English passport holder, he said the fact he couldn't leave the country for longer than five months without having to pay interest on his loan was inconvenient but was something he would have to handle if he decided to move abroad.

Toi Ohomai Institute of Technology Head of Student Support Dr Logan Bannister said it introduced the government's one year Fees Free initiative last year.

He said the amount a student may need to borrow can vary significantly but it could be assumed more people were likely to enrol and invest their time in education without having one.

''They also may have more earning potential in the future without the need to repay a student loan. This could have multiple benefits to the individual and their whānau.''

Data from Toi Ohomai reveals there were 10,400 local students in 2018 compared with 9900 in 2019 to date.

This year 4046 of the current uptake had not been charged any fees, he said.

Meanwhile, a Waikato University spokeswoman said it had 1065 students studying in Tauranga at its campus compared to 872 in 2018.

Economist Shamubeel Eaqub says student loans were just one more stress for people. Photo / File

Economist Shamubeel Eaqub told NZME last month student loans were just one more stress for a group that could be called more broadly "Generation Debt".

"It adds an additional pressure on this new generation.

"Not only are they dealing with the pressure on the educational front, but housing affordability is getting less and they are taking on additional debt. Everything is compounding with all the pressures we see on young people.''

Read more: Kerre McIvor: Cry me a river, student loan dodgers! An ANZ spokesman said it would take student loan repayments alongside other expenses into account when potential customers are applying for a home loan.

''We need to ensure they can afford their lending repayments. As with any lending we encourage customers to consider their options before taking out a loan as it is money you need to pay back.''

Student loan interest rates
* Interest is added to all student loans each day and added to your loan at the end of the tax year.
* If you are a New Zealand-based borrower, interest is added to your loan but is then written off.
* If you go overseas your interest will not be written off, but there are some exceptions to this.
* The interest rate is set each year. It is currently 4 per cent
- Source: IRD

By the numbers
* Nationally since 1992, 1.3m students had borrowed $26.1 billion and 570,000 people had fully paid back those loans.
* 91 per cent of $1.3b of overdue loans were owed by borrowers living overseas.
- Source: Education Counts website