First New Zealand student loan defaulter arrested at the border, has home worth $300k

It was bound to happen sooner or later.  The New Zealand Government had been warning people for a couple of years that if they did not make any attempt to pay their student loan there would be consequences.  They made it very clear that 20 people were being monitored and facing arrest if they entered the country.

The first arrest has taken place.

Ngatokotoru Puna, living in Rarotonga was arrested when he tried to depart New Zealand.

He has a student loan debt of $130,000 and had not made any repayments for several years despite letters from the IRD.

Instead he made excuses saying he had five children and a mortgage of $300,000.

There are a couple of things that don't add up.

How can you afford a $300,000 mortgage on a $30,000 salary?  No bank would give you a mortgage of that size with an income that low.

How can you have five children yet not make a single payment on your student loan?

How can you ignore letters from the IRD?  Everyone can afford $5 or $10 here or there.  There's no excuse for not paying it for 12 years.

Why would you take out a $300,000 mortgage but not fulfill your student loan repayment obligations?

Yes, some people cannot afford to make the minimum repayments but there are options available to these people.

They can contact the IRD or make periodic payments of what they can afford rather than deliberately choosing not to pay a single solitary cent.

All this said, the New Zealand student loan system needs reform.

When people are living overseas they may not be citizens and that ultimately means they must have savings if they get into a tricky situation or they face being homeless.

If you are living in New Zealand then your income is taken into consideration when calculating your student loan repayments, however that is not the case for those living overseas.

It is simply, "pay x amount, or else."

But how can you get $5000 out of a low income?  Are people overseas supposed to be homeless so they can pay their student loan when those living in NZ could effectively be on welfare and not required to ever pay a single cent?

Income must be taken into consideration.

Then there is the matter of interest.

Interest for those living overseas is 5.5% which means that some people could effectively see their student loan constantly increase while they are making an effort to repay.

How is that in the government's best interests?  Cutting interest in favour of a flat fee of say $200 or $500 per year would be more effective rather than creating a disincentive to pay back the student loan.

In addition, confiscating the passports of people who default on their student loans is counter productive, especially if they have jobs overseas.  That could end up costing the taxpayer in the long term if they are forced to remain in NZ when they have employment overseas.

It is time the student loan system was reformed so that people can pay their student loans back based on what they earn rather than a gun being held to their head and being forced to pay what the genuinely cannot afford whilst those in NZ are not subject to the same harsh conditions.