Pay back your loans, NZ warns globetrotting graduates

New Zealand authorities are ramping up efforts to recover billions of dollars in unpaid student debt from Kiwi expatriates, as an economic downturn fuels a spike in borrowing.

Tax officials are obtaining information from the New Zealand Customs Service to track down overseas-based debtors who owe some NZ$2.5 billion (£1.1 billion) – more than three times as much as a decade ago.

Kiwis who move overseas are obliged to remit up to NZ$5,000 a year, on a tiered scale based on how much they owe, until they have squared their student debts. But barely one-quarter meet this obligation, according to a Ministry of Education report.

Expatriates account for 75 per cent of overdue borrowers and 93 per cent of the arrears, which include NZ$1.1 billion in penalties and accrued interest. Most overseas-based debtors, unlike their compatriots at home, are charged interest on their loans – currently levied at 5.6 per cent a year, and 9.6 per cent for overdue repayments.

New Zealand’s Inland Revenue department is monitoring inbound and outbound flights to confront debtors, and taking legal action against “borrowers who refuse to engage”. In May, an Australian-based doctor who owed about NZ$180,000 was arrested at Wellington airport, according to Radio New Zealand.

The department is also obtaining contact information from the Australian Tax Office to “engage” graduates across the Tasman Sea and “discuss resolution of their default”, the report says.

Repayments increased by 15 per cent, or NZ$14 million, over the first quarter of the year, compared with the same period of 2025, following Inland Revenue “campaigns” and “other interventions”. However, some of these interventions netted surprisingly meagre returns.

Almost 4,000 cases were referred to overseas collection agencies, which succeeded in securing just NZ$3.3 million. Direct contact with another 4,400-odd borrowers managed to extract repayments from more than one-quarter of them, with more than 500 clearing their debts in full, but netted just NZ$2.8 million.

Australia, which introduced rules requiring expatriate graduates to repay their student debts 10 years ago, has more than 35,000 offshore debtors collectively owing more than A$1 billion (£529 million), according to the latest available figures.

Barely one in four of these graduates makes the compulsory repayments, the figures suggest, although some – specifically, people who spend less than half the year overseas – are exempt.

Monash University policy expert Andrew Norton said he had supported the mandating of overseas repayment as a way of “making the system seem fairer”, although “based on New Zealand and English experience, I never thought it would be highly successful”.

The New Zealand report says more students are taking out loans, and the loans are getting larger, as the country’s economic downturn reduces work opportunities and increases living costs.

The number of active borrowers increased by about 13,000 or 12 per cent, and borrowing rose by NZ$184 million, or 19 per cent, compared with the first quarter of the previous year.

“The continued increase in borrower numbers is likely to have been strongly influenced by the performance of the economy, and subsequent slowing of the labour market,” the report says. “This increase in borrowers began during the April to June 2024 quarter and goes against a previous long-term trend of declining active borrower numbers.

“Generally, we expect more people to choose to enter or remain in study when there are fewer employment options available to them.”

john.ross@timeshighereducation.com