Thousands of loan defaulters could face legal action

Graduates who head overseas to avoid paying their student loans could be threatened with legal action. Photo / Mark Mitchell

Thousands of student loan defaulters living abroad could be threatened with legal action as the Government seeks to recover millions of dollars of outstanding debt.

The Government today announced an Inland Revenue pilot scheme targeting loan defaulters across the Tasman would be expanded to target a further 50,000 debtors in Australia and the United Kingdom.

More than $4.7 million had been recovered in the 10-month pilot scheme, which had targeted 1000 Australia-based debtors.

The expanded scheme would involve contacting 50,000 loan holders either directly or through a nominated contact person in New Zealand, to seek payment of arrears or to set up a payment plan.

Legal action would follow if borrowers failed to comply.

Revenue Minister Peter Dunne said the early stages of legal proceedings were already underway for a small number of borrowers as part of the ongoing pilot scheme in Australia.

"Legal action is a last resort. However, it will be taken against borrowers who have not responded to final demand letters and are making a deliberate choice not to repay their loans," he said.

Most borrowers in New Zealand complied with their repayment obligations and it was fair that those who did not faced consequences, regardless of whether they were here or overseas.

Tertiary Education Minister Steven Joyce said the student loan scheme was one of the most generous in the world and it was important borrowers took on all its responsibilities, including meeting repayment obligations.

"If they won't voluntarily meet their obligations, we will be coming after them," he said.

Mr Joyce said improving overseas repayment rates was a priority as the Government worked to deliver greater value for taxpayers and ensure the student loan scheme was viable in the future.

As of June this year, borrowers living abroad had loans of more than $2.3 billion, of which $289m was overdue.

Overseas-based borrowers took a median 13.9 years to repay their loans, compared with 4.6 years for those living in New Zealand.

- NZPA