Chile will have free tertiary education from 2016 onwards.

According to the IMF, in 2013, Chile's GDP per capita was $22,534. New Zealand's was considerably higher at $33,626 per capita. New Zealand is a much wealthier country, so if Chile can fund higher education there is no reason why New Zealand cannot do a better job in this regard.

Overseas based student loan debtors get behind on their student loans for all sorts of reasons, including the IRD not getting in touch with them, or they thought the loan had been paid off, or they have not been financially in a position to make payments. When these people summon up the courage to contact the IRD they are shocked to find out how much the debt has increased through interest and penalties that are so high they would make a loan shark blush. 

Debts that are 400% - 800% higher than the actual amount borrowed are common. The New Zealand government has the strange belief that high interest will somehow encourage people to pay. It doesn't. Even those who want to pay often have no hope of getting back in control of their debt. They end up having no option but bankruptcy and the government gets nothing. 

Other countries have fairer systems for their student loans. Some have free tertiary education. Others don't charge exorbitant interest. Others (like the United States) offer the ability to get rid of a student loan debt through voluntary work. But not New Zealand. 

We think a fairer system is needed. If there is greater fairness, the government will be paid because people can afford to do so. Everyone wins.

In New Zealand, there is an earnings threshold of $19,084 before student loan repayments are deducted. Deductions are then made at 12% of your earnings (NZ residents). 

What is the situation for Australians? Their earnings threshold, before any student loan repayments are required, is A$53,345. At that level of earnings, student loan payments are only 4% of the amount earned above the threshold. The maximum deduction is 8% and this is for earnings of more than A$99,070 a year.

There are many countries where tertiary education is free. Obviously it's not free in Australia, but their repayment system is much fairer than ours, especially to people just starting out in the workforce after finishing their studies, and to economically disadvantaged groups. If New Zealand wants to build an internationally competitive knowledge economy something needs to change.

Bloomberg Business reports on a dramatic increase in young adults unable to move out of their parents' homes. Increasing student loan debt is the major reason for this change. The report says:

We believe that the same trend is occurring in New Zealand. We are now seeing people with student loan debts of more than $300,000. This level of student loan debt is frightening, however, people don't even need to have a fraction of that debt amount before their financial lives become impossible to manage.

Please talk to us if you, or someone you know, needs help.

The Wall Street Journal reports on the harm done to the US economy by large student loan debts:

Student loan debt also harms the economy in New Zealand as it stops people from buying houses, starting businesses, and, in general, from getting on with their lives. We need a discussion as a society about fairness when it comes to education and student loan debt. 

We often hear from overseas based NZ student loan borrowers who believe that they have no payment obligations because they don't earn much money.

If you live in New Zealand, your income determines whether or not you have to make a payment to the  IRD for your student loan. If you live overseas this does not apply. All overseas residents have minimum compulsory payments, even if they have no income. The minimum compulsory payment is related to the size of your debt and not to your income.

Please contact us if you would like more information.

If it feels like you can't get on with your life because of a huge, growing, student loan debt, don't despair. We can help. Please contact us today if your student loan debt is getting you down.