With New Zealand students having some of the highest debt burden in the world, any options for free and nearly free tertiary alternatives are welcome. Free Code Camp has recently published a list of some of the free options.

Many New Zealand students start their working lives with huge debt burdens. It impacts their ability to start families, buy a house, and to save for retirement. It detrimentally affects mental health and life choices. New Zealand students do not compete on a level playing field with students from other countries who have their tertiary education paid for by their governments. A recent article in the Huffington Post decries the high level of US student loan debt but the average New Zealand student loan debtor owes more:

Norway, Finland, Germany, and Denmark offer free higher education for all. France charges tuition, but it is almost free. The former Communist nations of Russia and the Czech Republic do the same. Beyond Europe, developing nations such as Argentina and Brazil provide free higher education. More than 300,000 Chinese students are attending university in America, and 40% of them are pursuing graduate studies. In China, however, the cost of college education is about $1,000 a year, which most families can afford. More than 160,000 students from India are in the U.S., and about 85% of them are pursuing either graduate studies or practical training. But in India, tuition fees are affordable if a student is admitted to university through a government selection process.

Better cost choices and more study options can only benefit tomorrow's students. 

The government's own Productivity Commission has identified major issues with tertiary education in New Zealand:

...tertiary education system is not well-placed to respond to uncertain future trends and the demands of more diverse learners. The system is not good at trying and adopting new ways of delivering education, and does not have the features that will allow it to respond flexibly to changing circumstances.

Tertiary teaching quality is also an issue. The Productivity Commission believes that reintroducing interest on New Zealand based student loan borrowers is the way forward.

​It seems that it is probably only a matter of time before interest is reintroduced. We believe that current borrowers, and intending students, need to take this risk into account. The smaller your student loan debt, and the faster you repay it, the less your risk of financial disaster if the law changes. The law can change without your knowledge and the IRD may not contact you until your debt has grown very large. Fees for a course that you have already signed up for can increase while you are in the middle of the course, leaving you in financial difficulty or with a much higher than expected student loan.

If you are a potential student, our advice is to carefully evaluate the likely costs (now and if interest is added) and benefits of tertiary education, before you sign up. It is true that tertiary education can have many benefits, including greater financial well being, but this does not apply to all courses or all students. Many countries have free, or nearly free, tertiary education options. Even in the case of Australia, while many were dismayed at the increase in university fees for New Zealanders, consider that their student loan repayment threshold and repayment requirement is more borrower friendly than is the case for New Zealand. 

​The main thing is to be aware of all possible options and risks before blindly jumping into debt.

Germany offers over 400 universities. Overseas students can study for free, you are allowed to work part time while studying, and when you are done with study, Germany welcomes you to stay and find a well paid, rewarding job.

New Zealand's GDP is between the 50-60th in the world, putting the economy on a similar level to Iraq and Vietnam. This explains why many graduates cannot find jobs and are forced overseas to work. In contrast, Germany has the fourth strongest economy in the world and an excellent quality of life. Not only do they have student friendly policies like no fees, they are hungry for your skills. It could be worth  considering.

A common question we get asked is about how hardship applications work.

Let’s say you have a student loan debt of $100,000 which includes overdue debt of $50,000, penalties of $20,000, and interest of $70,000. The break down might look something like this:

Original borrowings      $25,000
Interest charged             $70,000
Penalties                           $20,000
Repayments                    $10,000
Total balance due:         $105,000

Of this $105,000, let’s say that $50,000 is overdue because you have not paid your compulsory overseas payments for a long time. Until that overdue amount is dealt with, the IRD will probably already be chasing you, or they will be doing so soon. If you deal with the overdue amount, and keep up with at least your minimum annual compulsory payments, the IRD will leave you alone. Paying your minimum annual compulsory payments won’t necessarily stop your debt increasing as this will depend on your debt level and interest rates charged by the IRD. Also be aware that there are many reports of the IRD’s debt collectors referring to the overdue debt portion as being the full amount owed, leading many to believe that this is “all” they have to pay. Always check what you are being told and get it in writing. If you pay “just” the arrears you will still have student loan debt remaining to be paid.

Back to the hardship example. If you are granted full financial hardship, the IRD deducts the penalties from your debt, but interest increases. In most cases, the overall debt decreases because of these adjustments. In some cases the overall decrease can be a 5 figure amount. This is good, but usually of greater potential benefit is the fact that the part of your debt that was previously deemed overdue is no longer overdue. It is still due, but you will not be chased for it as it is not overdue. The example above might now look something like this:

Original borrowings        $25,000
Interest charged               $80,000
Penalties                             Nil
Repayments                      $10,000
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Total student loan debt balance: $95,000, of which nothing is overdue. As long as you pay at least your minimum annual payments the IRD will leave you alone.

The IRD talks about arrears being capitalised. Basically this means that what was overdue is no longer called “overdue” and is just part of the overall debt (after penalty and interest adjustments).

Applying for hardship can feel harsh and intrusive. Although the IRD has the power to accept a verbal application for hardship, in most cases  a form has to be completed and you will have to provide several months of statements for all kinds of accounts including bank accounts, credit cards, car loans, and mortgages (depending on your individual situation) etc etc. Payslips, and details of your partner’s finances, are also required. If you refuse to provide all requested details the IRD will probably decline the application without further consideration. In our experience, it won’t matter how detailed the information you initially provided was, the IRD will find something else to ask for. The process can feel difficult and like the IRD is looking for ways to fail you, but if you are genuinely in severe financial hardship, and persevere with the IRD’s requests, the chance of success is reasonable. You must also ensure that your responses are honest and timely. If you apply and are turned down but your circumstances have, in the meantime, become even worse, or you were turned down because you didn’t get the documents to the IRD on time, our experience is that the IRD may give you another chance.
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The focus of the hardship application is on current severe financial hardship. If you were in financial hardship in the past, this can provide helpful supporting background information, but it is the present that has the greatest focus.
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Do you have any general questions about the hardship application process? If you post them on our Facebook page, we will do our best to  answer. If you need specific help, please email us.

Following on from our recent post about free, and nearly free, tertiary alternatives we have details of another option. The University of the People is an accredited university, supported by renowned partners like New York University, the University of California at Berkeley, Microsoft, and Google. The University of the People is not free, but the cost is much less than the cost of studying at a New Zealand university. As an example, the cost of a bachelor's degree from the University of the People is around US$4,000. In New Zealand that would probably cost you at least NZ$20,000. This type of education isn't suitable for everyone, but if it might suit you, it is worth serious consideration given the large savings and good quality. 

Many people no longer need to pursue an expensive tertiary education in order to embark on a rewarding career path.

There are a growing number of reputable education providers who offer free, or nearly free, skills and tertiary education courses. Examples include Khan Academy, EdX (founded by Harvard and MIT), Udacity, and Codecademy. Richard Branson recommends this new way of learning as a way of avoiding a “debilitating burden…of student debt” and as a way to quickly, and cheaply, acquire in demand skills.

Free, alternative education won’t suit everyone, but if you are thinking about your future path, it is an option worth considering.

There is support from both main political parties for teachers to be required to have post graduate qualifications. In principle, having better educated teachers sounds good, but there are issues that may not have been thought through:

• Who will pay for the extra training costs involved? Presumably, the teacher trainees will be expected to get even larger student loans.
• Will there be a job for every graduate who wants one so that they are not forced to look overseas for work, draining valuable skills from New Zealand, and causing their student loans to increase by massive amounts through interest and penalties.
• Will teachers be better paid to cover the increased time and cost of training?
• Will the teachers be able to afford to live in Auckland? We know of increasing numbers of overseas resident, New Zealand trained, teachers (and others with valuable skills), who wish to relocate back to New Zealand but who find that they simply cannot afford to live in Auckland. In many cases, people have been offered jobs back in New Zealand which they have had to turn down because of high living costs and relatively poor salaries.

Unfortunately, some student loan debtors find themselves in a situation where the only realistic way of resolving the debt is New Zealand bankruptcy. Many of these student loan debtors would like to come to a settlement with the IRD but they are refused, even in cases where the loan terms and conditions were changed without any notification to the debtor, where the penalties and interest have caused the debt to grow many times larger than the original lending, where the education provided was of poor quality, and where the debtor/borrower has tragic personal circumstances. We know of many cases where the IRD has turned down settlement offers of tens of thousands of dollars that the debtor was able to arrange to borrow through family, leaving the debtor with no other option but to pursue bankruptcy. In such circumstances, the IRD receives nothing. No commercial lender would conduct its business like this.

Nobody wants to become bankrupt but sometimes there is no choice, and in some cases, the finality of bankruptcy, and freedom from harassment, can be helpful for the borrower's mental health. It is concerning that New Zealand's Labour Party is opposed to student loan bankruptcy. To suggest eliminating the bankruptcy option without simultaneous proposals to reform high interest rates and inflexible repayment options, and to grow New Zealand's job market for graduates, seems harsh. To avoid the possibility of an enormous debt, that they may struggle to repay, prospective students should consider all options for having as little debt as possible. This may even include studying in countries with free university education like Germany.

The Independent reports that UK student loans are having a devastating effect on the finances and mental health of many borrowers. In our experience, the situation is similar in New Zealand but there is less discussion. Commonly we see situations where debtors and their families are humiliated and ridiculed by debt collectors, the IRD, and in the media. The heavy handed collection approach causes many to give up in despair.
 
As the Independent also reports, New Zealand student loan debtors have the second highest average debt out of all English speaking countries. In an election year we should be asking who this high level of debt benefits. We also need to know what the plans are for the future management of student loan debt. Will the IRD offer more flexible payment solutions? Will interest be reinstated for New Zealand based borrowers? Will the debt be sold to private debt collectors? If new students incur less debt under a new government's new policies, how will we ensure that people with existing debts are treated fairly? 

​Let's talk about the issues and the fairest way forward.

The IRD recently announced that it has tracked down an additional 57,000 Australian resident student loan debtors, whose whereabouts were previously unknown. The IRD's new ability to find Australian resident debtors stems from its information sharing agreement with the Australian Tax Office.

​We provide unbiased, independent advice about options and we can assist with IRD negotiations or bankruptcy. Please contact us if you need help.

The IRD's student loan debt arrest policy has been so successful for the government that the IRD receives back $22 for every $1 it spends on chasing student loan debtors. Not only that, other countries are being encouraged to follow New Zealand's example. The Higher Education Policy Institute suggests that the UK should do the same and notes that the arrest law is like a "fruit machine." The Institute also notes how little support student loan debtors have in the media. 

We deal with people whose lives are devastated by the IRD's refusal to fully consider their financial situation, and who have no way to get their debt back on track because of inflexible policies. Arrest laws frighten people and probably do encourage payment, but our opinion is that more people would pay if there was greater flexibility to consider their circumstances.  People want to pay but sometimes they need a bit of help.

Last week the IRD announced that they had obtained the contact details for 10,400 Australian resident student loan debtors from the ATO. They are now seeking the same details from the UK's HM Revenue & Customs, and from tax authorities in other countries. The IRD has used debt collectors in the UK for some time, but this proposal will strengthen their ability to locate debtors and to force them to pay.

If you live overseas and have not paid your student loan debt, we recommend that you deal with it sooner rather than later. 

​Please contact us if you have any concerns about your own situation.

The New Zealand IRD has received the contact details for 10,400 student loan debtors living in Australia. This follows the implementation of an information sharing agreement between the IRD and the ATO. 

If you live overseas, have a student loan debt, and haven't heard from the IRD for a long time, you could be contacted at any time. In order to avoid a ruined Christmas, we recommend that you make contact now, instead of waiting for the IRD to find you. 

This is the time of year when people are planning Christmas trips back to New Zealand to visit family. We know that many of you are anxious about the possibility of being arrested because you are behind on your student loan. Don’t let an arrest, or worrying about whether that could happen to you, ruin your holiday plans. If you sort out your arrears there is no risk of arrest. They can be sorted by entering into a payment plan with the IRD, paying the arrears off, being granted financial hardship, or by becoming bankrupt. If you do become bankrupt you will need permission to leave New Zealand but this is usually easily obtained.
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If you are planning a trip to New Zealand, we recommend sorting your student loan debt out ASAP. Please let us know if we can help.

A recent study reported that 3% of US employers offer student loan repayment benefits. While 3% is not much, it is better than New Zealand. New Zealand employers who offer a general student loan repayment perk are rare.

If New Zealand employers want to attract and retain good talent, this could be a good option to consider. If you know of any employers who offer this benefit, please let us know, so that their good deeds can be publicly recognised. 

Two recent cases show that the student loan scheme needs an overhaul. Some details have been changed to protect client confidentiality.

• Case 1: Client was forced out of New Zealand because they were gang raped here. Being in New Zealand triggers their PTSD. The IRD charges them interest and penalties on their student loan. The client's life circumstances make it impossible for them to get an ordinary job that would generate enough to pay what the IRD demands. This person feels duty bound to pay their debts and not use bankruptcy as a solution. Money from prostitution is being used to pay the IRD's demands.
• Case 2: In the early 1990s, the original debt was for $35,000. The client paid $30,000 in the mid 1990s and went overseas believing that that the IRD would be in contact with them if there were ongoing obligations. At that stage the original debt should have been $5,000.  The IRD made no contact until 20 years later when they demanded $80,000. Even if this person now offers $50,000 to settle, it will be refused by the IRD. The likely result is that the person will feel that there is no way out other than by becoming bankrupt. The IRD will miss out to the tune of $50,000 and get nothing.

In our opinion, the IRD needs better tools and flexibility to negotiate with people who genuinely want to settle. They also need to be accountable if their actions or inactions have contributed to a person's debt.  Although there are many cases that can be resolved through negotiation with the IRD, there are also many where the IRD ends up with nothing where a different approach could have produced a win/win solution for both the IRD and the borrower.

Yesterday we published comments on our Facebook page, from the ACT Party, calling for an end to interest free students loans for New Zealand resident students. Today, the New Zealand Herald is asking the same question. One of the right wing's most prominent bloggers has also recently called for interest free loans to end.

There is a definite trend here. Calling interest free loans "middle class welfare" makes it easier to sell the removal of this benefit, because how can the left wing effectively oppose this since doing so makes them look like they favour the middle classes over the poor?

We expect that interest free loans will come to an end. The issue is when, and this is something that will be affected by how much this becomes an election issue, and who wins next year.

We deal with a very large number of tragic cases of overseas based borrowers who are financially ruined by student loan interest and penalties. Most New Zealand based borrowers are unaware of the impact this can have, having not personally experienced the destructive power of compounding student loan interest. Our opinion is that the media items are a warning and that you should take steps to minimise your risk. These steps could include:

• Not studying courses that will not generate good future income (unless you feel really passionate about a subject and are willing to pay the cost for this).
• Ensuring that the course, and where you plan to study, are of good enough quality. It needs to be value for money.
• Finishing your course in the shortest possible time. If you drop out, you will have the debt but no qualification.
• Understanding the loan contract, that it can change at any time without your input, and the power of compounding interest and what this can do to the debt. If you don't understand, get help before you commit to a debt.
• Looking at other options to fund your study: working before studying, going to an institution with low or no fees (some South Island institutions offer good deals, or perhaps you are eligible to study overseas in a  country where tuition is free), and scholarships.
• If your student loan debt has errors, or you are unhappy with your educational purchase, you should deal with this at the time, as delay affects people's rights.
• Keep copies of everything. 
• When you graduate, make it a top priority to pay the debt off ASAP and pay more than the minimum. Debt is like cancer. It can grow and take over your life. It's much better to kill it before it metastasises out of control.
• If you are in an unfortunate situation where bankruptcy may be the only option, it is better to face facts and get on with it rather than delaying. Delaying could mean that the government changes the law and student loan debts are no longer covered. Delaying also means that you may have built up more assets that could be lost by becoming bankrupt, and that you will have fewer earning years ahead of you, when you come out of bankruptcy, to get back on your feet.

​Please talk to us if you have any concerns about your situation.

New Zealand has one of the highest university drop out rates. That means that the students probably incurred tens of thousands of student loan debt for nothing. Some drop outs can't be helped, but don't shoot your future financial self in the foot by going to university without being sure that it is for you.

Some recent drop outs were interviewed by Vice magazine. Don't fall into the same trap. If you want to spend your life partying, or don't know what you want, it will be cheaper to get a job or travel until you've sorted things out. As a society we need to do better for our young people by encouraging a better level of financial literacy and by making sure that they really understand the implications of getting into debt.

​Sadly, some student loan debtors are forced into a position where they have no choice but to declare bankruptcy.

Problems often arise because the IRD has not kept to its legal obligations to keep people informed of changes to their debts, or because the IRD gives out wrong information. The result is that people who thought they had a  $30,000 debt, and were never advised of changes to their loan agreement, or of interest and penalties being charged, are contacted out of the blue by the IRD, 20 years later, and told to pay $120,000 immediately, or else. Some people make large payments to the IRD, to repay their debt, only to then have them say that their figures were wrong and demand payment of more. When it comes to student loan debts, the IRD is not generally accountable when it makes mistakes or fails to keep to its obligations.

Almost every student loan borrower who becomes bankrupt first tried to resolve things with the IRD but found that the IRD refused to consider a reasonable payment plan or offer. Some of them are suicidal because of their treatment by the IRD.  By leaving these people with no other choices, the IRD ends up worse off as they generally receive nothing if a student loan debtor becomes bankrupt. These people want to pay but are given no real choice.
We understand that the IRD is now putting pressure on to close the bankruptcy option. There is also pressure from the media to stop the bankruptcy option.

Bankruptcy is a big step and a last resort. For some people it is the only way forward. If there is any possibility that a bankruptcy might have to be an option for you, you need to look at this sooner rather than later, in case the option is suddenly removed.

A second student loan debtor has been arrested as she tried to board her flight back to Australia. The government has others on their list. What steps can you take to ensure that you are not targeted?

• If you have any overdue student loan arrears, that are not under a formal arrangement with the IRD, you are at risk of arrest.
• The larger your arrears the greater your risk. Other factors count too.
• Student loan debts do not go away unless the person dies or becomes bankrupt.
• Do not think that because you have never heard from the IRD, that you do not have a problem. If you live overseas, and have not paid anything towards your student loan debt for many years, you probably have a very serious problem.
• Ignorance does not make you safe.
• Even if your student loan account looks like it has no arrears, if the IRD does not have the correct travel dates, your account details may be unreliable and you could be at risk.
• If your arrears have been taken care of via bankruptcy, or hardship, you are probably safe. Bankrupts need permission to leave New Zealand, however, this is not usually a problem.
• Unless you are 100% sure that you are up to date on your student loan debt, and have zero overdue arrears, you should check your situation. You can contact the IRD directly, or we can check for you quickly and discreetly if you have your IRD number (a fee applies).
• Do not ignore your student loan debt. If you do not know what it is, you need to find out. If you have arrears you need to have a plan to deal with it. The problem will only get worse if you leave it.
• If you have arrears and want to be safe from arrest or other IRD action your options are: a formal arrangement with the IRD, becoming bankrupt, applying for and being granted hardship, or paying.
• Please contact us to discuss your options. We provide prompt, confidential assistance to many people in this situation.

Recently the government announced its proposal to list serious student loan debts with credit reporting agencies. At the moment, if a student loan debtor is behind on their debt, this won’t usually be listed in their credit report unless legal action has been taken, or the person has become bankrupt. This new proposal means that many student loan debtors could find that their credit rating is destroyed. Once an adverse item is on your credit record it usually stays there for 5 years but because the student loan debt issue may be ongoing there is the potential for your credit record to be harmed for a longer period. Once your credit record is damaged it can be impossible to do normal everyday things like renting accommodation, opening a power or telephone account, opening a bank account, applying for a credit card, or a new job.
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The time to deal with your student loan debt problems is now when you still have time on your side to get things sorted.

The US Federal government announced today that it is taking steps to identify the 400,000 disabled Americans who are eligible to have their student loans wiped. Not only are these people eligible to apply for a full discharge of their debt, but the government is taking steps to find them and guide them through the process. 

In New Zealand there are no such exemptions for disabled people. When people, through no fault of their own, cannot afford to pay their student loan debt, shouldn't there be ways for them to get help at this level, that don't involve bankruptcy?

If America can help those who genuinely need it, then why not us?