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June 3, 2013 | by  | in News | [ssba]

A Loan Way Away

Threats from the National Government to overseas borrowers are already having an impact on repayments, with new policy directions making loan repayments imperative.

Recent leaked information from the Inland Revenue Department shows a leap in the number of overseas residents contacting the IRD, looking to set up repayments. A new policy announced in the 2013 Budget puts in place measures that allow the arrest of international borrowers at the border if they have defaulted on their loans, among other actions.

The threshold for arrest has not been set, but Minister for Tertiary Education Steven Joyce has said it would target only the worst offenders.

“The onus is still on the person to make payments, but nobody would find themselves at border control and have not had anyone contact them about their loan.”

Of the more than $13 billion loaned to students, $520 million of this is in default. More than 80 per cent of the defaulted money is accounted for by defaulters abroad. Overseas borrowers can keep their debt interest-free for six months while abroad, but special dispensation must be sought for any periods longer than that.

Expats living overseas often let the debt build up in the background, but Revenue Minister Peter Dunne believes these changes will amend that.

“It’s something like this that actually jolts them into action,” said Dunne.

Salient spoke to one former Victoria student now living in London, who thought the changes were “probably a step in the right direction”.

“I’m trying to pay mine off as quick as possible anyway, because of the interest. If people aren’t paying them back, fair enough that the Government’s taking action ‘cause at the end of the day if you signed up for a loan you’ve gotta pay it back.

“It’s not fair to expect someone else picks up the tab for your education,” he said.

The IRD is currently taking legal action against 103 overseas borrowers before they are declared bankrupt, a measure taken with almost 700 loans already. If a borrower is declared bankrupt, the loan is annulled.

Along with the arrest-based impetus, the Budget also includes compulsory repayments based on the size of your loan, as previously reported in Salient. These changes will come into effect in April 2014.

[ssba]

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