Where in the world is student debt?
Students who stay overseas for fear of their mounting student debt may get some welcome news in the next few months.
The Government plans to reduce late repayment penalties for graduates who stay overseas because of their student debt, says Revenue Minister Peter Dunne.
In a speech at AUT University Dunne said the student debt was so burdensome and came with such enormous penalties that graduates “were effectively barred from ever returning to New Zealand".
For many New Zealanders going on an overseas experience, or “OE”, after graduating is a rite of passage.
But in a “Catch 22” type situation students who travel overseas are charged interest after just six months abroad - regardless of their income - on what would otherwise be “interest free” student loans.
The current interest rate for the 2011 tax year is 6.6 per cent.
With around 85,093 student loan borrowers currently living overseas this contributes a huge amount, $56.6 million, to student debt.
But not for much longer, says Dunne.
"A measure soon to be introduced will reduce the penalties to address this issue."
Legislation will be introduced in the next few months to give effect to changes in the way student loan repayments are managed, says Dune.
This will include a $30 million investment in an online repayments system.
In March this year overdue repayments totalled $283 million .
Around a fifth of that is owed by expatriate borrowers.
"We have relatively low collection from students that are offshore," says Dunne.
The government would be doing more to engage with overseas graduates and keep a better record of where they are and what they are paying.
Unitec’s Alumni and Development Manager Jo Hammer says, of the graduates from April 2010 and September 2009 who completed graduate destination surveys, six per cent of these were living overseas.