Should serial student loan defaulters face arrest?
Update 11.30am: The man arrested for defaulting on student loan repayments on Monday as he tried to leave the country says he’s the nephew of Cook Island PM Henry Puna.
Ngatokotoru Puna, who’s 40, has reportedly said he is the maths department head of Rarotonga's national college and was in New Zealand as a result of an invitation to a conference.
Thanks to what was described in Manukau District Court this morning as a "significant" repayment of his loan – $5000, according to one report – police have returned his passport so he can leave the country.
Mr Puna is reported as saying he’s never been spoken to by IRD about issues over his loan, while the government agency says it made “strenuous” efforts to contact him.
He’s also reported as saying that, due to a $30,000 salary, a $300,000 mortgage debt and having five daughters, repaying the loan will be a struggle (RNZ is reporting that Mr Puna had a $40,000 student loan when he left New Zealand, which has since ballooned to $130,000 due to interest).
New Zealand University Students Association acting president Laura Harris has said the arrest points up a basic flaw of the repayment scheme, in that it is based on what’s owed by the borrower and not their income.
Earlier: A student loan defaulter was arrested at the New Zealand border on Monday for ignoring requests to repay his debt, in the first example of a long-promised crackdown.
Last July the IRD announced it was monitoring and considering the arrest of 20 individuals who had consistently failed to make loan repayments.
This followed a March 2014 law change enabling arrest warrants to be issued for serial defaulters to prevent them from leaving the country until their arrears are resolved.
The arrested man, who has been living overseas for the past 11 years and has a debt in excess of $20,000, was bailed to his parent-in-laws’ house after an initial court appearance and is due back in court today.
In a statement, an IRD spokesman said that it utilised its powers to arrest the loan defaulter as “a very last resort,” after having fruitlessly tried to contact the man and agree on repayment arrangements.
As of May last year, student loan borrowers numbered more than 730,000 – or about 16% of New Zealand’s population. The 15% of borrowers living overseas are estimated to owe $3.1 billion, while total student loan debt is $14.8 billion.
The IRD has been running a campaign targeting those overseas borrowers who are not repaying their loans for the past five years.
Last year then-Revenue Minister Todd McClay noted that, “for those defaulting borrowers who don’t call, their contact details will start coming in from next year and Inland Revenue will follow these up.”
The defaulter arrested this week is unlikely to garner much in the way of sympathy from NBR subscribers.
In a poll run on the issue last July, over three-quarters (77%) of those voting said they believed that serial student loan defaulters should face arrest, while just 23% thought they shouldn’t.
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