Lifting student loan repayments from overseas-based borrowers

Budget 2013 will target overseas-based student loan borrowers with new initiatives to increase repayments and reduce defaulting, Tertiary Education, Skills and Employment Minister Steven Joyce and Revenue Minister Peter Dunne say.

“Overseas-based borrowers are continuing to let the side down with slow repayments and high levels of loan defaults, compared to those who stay in New Zealand and pay off their loans,” Mr Joyce says.

“While we have made some progress with overseas-based borrowers, it is time to up the ante to ensure they take responsibility for their loans and meet their obligations to taxpayers.

“We have been successful in reducing the cost of the student loan scheme to taxpayers, with the cost of borrowing reducing from around 48 cents in the dollar in 2009 to an estimated 39 cents in the dollar as at 31 March 2013.

“However, this still remains higher than we would like, and improving the rate of overseas-borrower repayment will improve it further. The Government is working to improve the compliance of overseas-based borrowers by both tightening lending criteria and increasing the speed of repayments.”

Mr Dunne says that since Inland Revenue's initiative aimed at encouraging overseas-based borrowers to repay their student loans started in October 2010, almost $60 million has been collected.

New initiatives affecting overseas-based borrowers include:

• Adjusting the overseas-based borrower repayment regime by introducing fixed repayment obligations and higher repayment thresholds for overseas-based borrowers.
• Introducing new sanctions that extend the child support border arrest system for the most non-compliant overseas-based borrowers with high levels of default on their student loan repayments.
• Extending the student loan and allowance stand-down period for permanent residents and Australian citizens from two years to three years from 1 January 2014.
• Putting in place an ongoing information-sharing agreement between Inland Revenue and Internal Affairs to collect contact details from passport applications.

“Adding two new repayment thresholds and fixing repayment obligations for overseas-based borrowers will help ensure compliant borrowers are repaying their loans faster,” Mr Dunne says.

“Previously, around 14 per cent of overseas-based borrowers did not meet the interest charged on their loans. We expect this to drop to 3.5 per cent. These changes will reduce repayment times for compliant overseas-based borrowers.”

As part of scaling up its activities, Inland Revenue is also engaging with a private sector debt collection agency in Australia to initially assist them with locating borrowers in default.  

"This tracing activity involves a group of 10,000 borrowers, believed to be in Australia, who have made little or no effort to repay their debt, or even make contact with Inland Revenue. Collection activity will follow once these borrowers are located,” Mr Joyce says.

Mr Dunne says it is easy to contact Inland Revenue, and making payments from overseas has also become easier.

“Inland Revenue has set up toll-free numbers in Australia and the UK and has a list of free online money-transfer service providers on their website. We strongly encourage these borrowers to get in touch with Inland Revenue and get on top of their loans.

“The message for borrowers living overseas is don’t leave it too late. They may go away but  their loan does not.”