Government wants to collect student debts overseas

By AUDREY YOUNG political reporter

Students who go overseas without paying off their loans may be targeted by the Government.

In a proposal which the Government hopes will help reverse the brain-drain, it is exploring reciprocal arrangements with Australia and Britain for collecting student debt owed in each other's country.

The move could affect more than 10,000 students who owe more than $135 million.

Associate Education Minister Steve Maharey said the Government wanted to remove a disincentive for former students who were reluctant to return home because of the debt.

"It is a good opportunity for students to at least lower their debt while they are away.

"What we don't want is a situation where students go away and come back to a large debt sitting here."

That applied especially to those who accumulated their debt through the 1990s because they paid interest on their loans all the way through.

Mr Maharey, responsible for tertiary education, said the exchange rate with the British pound could also make it attractive for Kiwis to start repaying their debts while they were overseas.

Inland Revenue, which collects loan debts, does not know how many people have left New Zealand permanently with outstanding loans.

But it says 10,344 former New Zealand residents with outstanding student debt are registered as non-resident for income-tax purposes with a total loan debt of $135.9 million (at March 31).

That means the number and debt are likely to be many times that, assuming most young students who leave on OE do not register with Inland Revenue.

The student loans scheme was introduced in 1992, when 39 per cent of fulltime students took one out.

By 1998, 70 per cent of fulltime students had taken out a loan.

The debt has mounted fast. In September, the total number of outstanding loans was 271,719, the total debt was $3.3 billion, and the average debt was $12,507.

The so-called brain-drain of young people is evidenced in Statistics New Zealand departure figures.

In the six months to June, 45,853 residents left New Zealand permanently or long term. Of those, 20 per cent were aged 20 to 24 and another 20 per cent aged 25 to 29.

Mr Maharey said Australia was in the initial stages of considering a reciprocal scheme, and early signs were that the British "may not see it in their interests" to collect the debt.

Foreign Affairs Minister Phil Goff will discuss the proposal further with the British Government when he visits early next year.

New Zealand has reciprocal agreements with Australia and Britain on superannuation payments and with Australia for the recovery of child support from liable parents.

Inland Revenue begins recovering student loan debt in New Zealand when the debtor's income reaches $14,768.

The Labour-Alliance Government is scrapping the interest on loans during the period of study for fulltime full-year students and for part-year and part-time students if their income is $24,596 or less.

The co-president of the New Zealand University Students' Association, Sam Huggard, last night acknowledged that many students left New Zealand to avoid paying back loans.

"But in terms of social policy perspective in keeping people here and attracting people back, it is probably a positive thing."

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