There are Kiwi expats who took out loans as young students, often only 18 years old, and who did not understand the responsibilities and obligations, one tax barrister believes.

As the debt mounts with interest, some will bury their heads in the sand. Others had settled in new home countries and forgotten they even had the debt, he says.

Dave Ananth, special counsel at law firm Stace Hammond, says he has had clients so distressed by out-of-control debt, they became suicidal or had their marriages break apart – “I’ve heard it many times.”

Breakdown of who owes what and who’s falling behind

At the end of March, there were 626,728 borrowers with a student loan. More than 18% of those borrowers have overdue payments, amounting to 116,286 people. And most of those with overdue payments are overseas.

More than $4b has been lent to Kiwis now overseas, and nearly $12b has been lent to New Zealanders still in the country, making the total balance just over $16b.

Just over 18% of student loan debtors are abroad, with 114,347 overseas-based borrowers listed in the latest dataset from the Inland Revenue Department (IRD).

Of those, 85,911 were overdue on repayments. This means more than 75% of overseas-based borrowers have overdue payments.

And those tens of thousands of overseas debtors collectively owe repayments worth $2.3b, meaning they hold 92% of the overdue student loan balance.

A breakdown of overdue loan repayments splits the debt between penalties and interest, and the principal loan.

And more than half of overseas-based borrowers’ debt is just interest and penalties: $1b worth of interest and penalties, and $1.3b of assessed principal.

New Zealand-based debtors, meanwhile, are overdue on $18 million, 7% of the total $2.5b worth of overdue payments.

And of the 512,381 borrowers in the country, 30,375, or 26%, had overdue payments.

About 39% of domestic-based borrowers’ debt is made up of penalties and interest.

How do loan repayments work while overseas?

Anyone outside New Zealand for more than six months is categorised as overseas-based. Interest will be charged on the loan from the day the borrower leaves the country.

And loan repayments from overseas-based borrowers are based on the loan balance at the time the borrower left the country.

In the year to April 2026, the annual interest rate was 4.9%.

A late payment interest rate, applied to the outstanding payment for every day it goes unpaid, is set at 8.9%. Rates are set every April.

Minimum annual repayments are set progressively, so borrowers with a balance of between $1000 and $15,000 must repay $1000; a balance of up to $30,000 will see $2000 required in repayments; up to $45,000 will require $3000; up to $60,000 requires $4000, and any loan over $60,000 will need $5000 worth of repayments.

There are several reasons the IRD would consider keeping a loan interest-free while the borrower is overseas. Borrowers can apply through their MyIR account online and will need to provide evidence of their situation.

The IRD did not respond to a request for comment, instead pointing the Herald to information available on its website.

‘I’m scared of opening IRD letters’: Kiwi expat

A 29-year-old Kiwi expat in Berlin, Germany told the Herald the weight of his loan repayments was difficult to handle while he was doing odd jobs on his overseas experience (OE).

“I’m scared of opening the online letters from IRD to see how much I owe on my student loan while overseas,” the man, who wanted to remain anonymous, said.

“It’s stressful enough having to learn a new language and find a job in a foreign country, let alone leaving your home and familiarity.

“Obviously, student loans should be paid back – and mine will be repaid as my income returns to normal.”

A 49-year-old woman was arrested last Monday while trying to leave the country at Christchurch International Airport.

Te Amo Matangi, who has called Australia home for the last 21 years, had a balance of $13,000 balloon to $58,000 in interest and penalties.

As she tried leaving the country, a ticket scan triggered an alert and a police officer seized her passport, informed her she had a warrant out for her arrest then took her into custody.

“I don’t think that I needed to be put in jail, and that’s what the police officers were reiterating as well,” Matangi said.

“I just feel like [the IRD] is really trying to make a statement.”

She urged other Kiwis living overseas to take the time with the IRD in order to not make the same mistake.

IRD says crackdown is changing borrowers’ attitudes

The coalition Government poured $29m a year into the IRD for compliance and collection work in Budget 2024. In this year’s Budget, the Government allocated a further $35m for compliance and collection.

The IRD says this funding has driven its jump in collecting repayments from overseas-based borrowers.

In the nine months from July last year, the IRD collected $207m from overseas debtors. That figure was 43% higher than the amount collected in the same period the previous year.

“As a result of the work we’ve been doing, we’re also starting to see a more positive attitude by new borrowers, most of whom are meeting their payment obligations,” the IRD said.

The IRD’s customer segment lead, Jane Elley, said in May: “We’ve contacted more than 12,000 borrowers, 1320 have entered repayment plans, and 960 people have fully repaid their overdue amounts.

“Three hundred and four overseas-based borrowers own property here, and during the first six months of our increased compliance work, they paid up $1.7m.

“For defaulters within this group who have refused to engage and resolve their default, further legal enforcement action will be taken, which may include NZ-based bankruptcy or charging orders over their properties,” Elley said.

“There were also 151 overseas-based borrowers with NZ-based investments, and between July and December last year, we received payments totalling $84,000 from some of them. Again, there could be legal action ahead, including taking deductions from their investments or bank accounts receiving interest income.”

The IRD can apply to the courts for a warrant to arrest overseas debtors who “knowingly default” on their repayments, Elley said.

She said Customs and airlines helped the IRD keep track of debtors by handing over information and alerting it to travel information or border crossings.

“We apply to the District Court and the police make the actual arrest. Once arrested and taken before the courts, a judge can order the defaulter to make reasonable efforts to arrange repayment to Inland Revenue,” Elley said.

Nation of Debt series

Monday: NZ nears trillion-dollar debt burden

Tuesday: Are higher taxes inevitable?

Wednesday: Consumer debt dips but 470,000 Kiwis behind on payments

Raphael Franks is an Auckland-based reporter covering business, breaking news and local stories from Tāmaki Makaurau. He joined the Herald as a Te Rito cadet in 2022.

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