"Our powers to arrest at the border are used as a very last resort, and would only follow strenuous efforts to contact the borrower to make repayment arrangements - these would typically involve making phone calls, sending correspondence via mail and email to the borrower, and attempting to contact them via any third parties such as nominated persons and/or any known employer."
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.
Mr Puna's arrest was the first time the hard-line arrest policy, passed in March 2014, had been used.
Ngatokotoru Puna, 40, the nephew of Cook Islands Prime Minister Henry Puna and first person to be arrested for student loan default. Photo / Michael Craig
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.
Those in default and living in Australia will come under more scrutiny from next month, when a transtasman information-sharing agreement begins. It 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. Legislation allowing the information-sharing passed last month.
Authorities say those in default should make contact with Inland Revenue, to arrange a repayment agreement or discuss hardship plans if in financial difficulty. Applying for an arrest warrant is a "last resort", the IRD says.
However, student unions have 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.
There are about 112,000 overseas-based student-loan borrowers, and roughly 70 per 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.
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.
Inland Revenue believe that the publicity around the first arrest at the border contributed to the increased activity.
But the arrest policy has been criticised as too harsh. Speaking about the information- sharing agreement with Australia in Parliament in April, 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."
