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