Student loan borrower arrested at border in 'last resort' over missing repayments

Author: Nicholas Jones, NZ Herald,
Publish Date: Sat, 25 Mar 2023, 9:00AM

Another New Zealander has been arrested at the border because of overdue student loan repayments.

Details released to the Weekend Herald under the Official Information Act show the latest arrest happened last year.

Use of the hardline power is rare - there was only one arrest in 2022 - and has continued despite Prime Minister Chris Hipkins’ past reservations about the policy.

There were no arrests in 2021, and two in 2020.

New Zealand’s borders shut in March 2020 in an effort to keep out Covid-19, with a Managed Isolation and Quarantine (MIQ) system subsequently brought in. Borders reopened in phases last year.

The arrest policy was introduced under National in March 2014.

The first arrest happened in January 2016, when Cook Islander Ngatokotoru Puna was stopped as he tried to leave New Zealand.

Puna’s $40,000 loan had ballooned to about $130,000. He said collection letters went to the wrong address, and had to repay thousands before authorities agreed to him returning home.

Ngatokotoru Puna, the first person to be arrested for student loan default. Photo / Michael Craig

There have now been a total of 11 border arrests.

Inland Revenue is responsible for chasing up overdue student loan debt, and its commissioner applies for the arrest warrants.

The department told the Weekend Herald that arresting someone at the border as they try to leave New Zealand is a “last resort after all other avenues to secure payment have been exhausted”.

“Inland Revenue will always try to work with our customers directly before pursuing legal action. There are relief options available to help manage repayments for those who are in a position of hardship.”

The amounts of overdue repayments at the time of arrest (not the loan balance) ranged from $15,000 to $90,000. Those arrested were aged from 30 to 55.

All those arrested either paid or reached a repayment agreement.

Inland Revenue declined to say how many overseas-based borrowers were having their travel movements monitored for possible arrest, reasoning “release of this information could adversely affect the integrity of the tax system”.

People with overdue repayments were sent statements and notices, Inland Revenue said, “including information on the range of possible collection actions”.

“We also increase attempts to contact overseas-based borrowers when we know they are in New Zealand and encourage them to contact us to sort out their student loan debt before they leave.”

Prime Minister Chris Hipkins expressed concern over the border arrest policy when he was education minister. Photo / Mark Mitchell

More than 77,000 overseas student loan borrowers have overdue repayments. The average amount outstanding is $24,135.

New Zealand-based borrowers are largely salary and wage earners, who have deductions made through PAYE. Only 5 per cent of borrowers in Aotearoa have overdue repayments, compared with 75 per cent of overseas-based borrowers.

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.

The Green Party is also opposed to the policy, but Labour is happy with it - Education Minister Jan Tinetti confirmed to the Weekend Herald “there are no plans to review the policy, change it or end its use”.

“My officials advise me only a small number of the most non-compliant borrowers are affected by this policy, and it is used as a last resort,” Tinetti said.

“It’s also worth mentioning that hardship provisions are available to those who cannot afford to pay, which means this sanction will only apply to those who could pay but refuse to do so.”

In 2018 Hipkins, then education minister, expressed concerns about the threat of arrest, telling Newshub it “sometimes exacerbates the situation, because it means those people never come home - sometimes you’re better to get them home then into an arrangement where they can start making payments”.

That same year, Labour introduced a flagship policy to pay for the first year of tertiary education. It was to be expanded to cover the first three years, but this was suspended in 2020, largely due to the impact of Covid-19 and the need to reprioritise spending.