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Student loan debt collectors?

Students may soon be confronted by debt collectors on their doorsteps.

A source inside the Ministry of Social Development has told The Wellingtonian the Government is considering using private debt collectors for collecting outstanding student loans.

Revenue Minister Peter Dunne has denied the claim, saying it would only apply to students living overseas.

The Government has engaged consultant company Burleigh Evatt to research private debt collection practices, and has also discussed creating a student finance company to manage the collection of student loans.

Last year in the Student Loan Annual Report, the Government recorded 30 per cent of student loans as an expense, given that they were unlikely to be repaid.

The Wellingtonian requested more information from several government ministers and departments about how the changes to student loans collection would work, but they proved extraordinarily evasive.

Questions about the proposal were sent as Official Information Act requests to Tertiary Education Minister Steven Joyce, Finance Minister Bill English, Social Welfare Minister Paula Bennett, the Treasury and the Inland Revenue Department.

All acknowledged receipt of the request except Ms Bennett’s office.

Mr English’s office informed us its request was being transferred to Mr Joyce and this was followed by the Inland Revenue Department transferring its request to both Mr Joyce’s and Ms Bennett’s offices.

The Treasury transferred the request to Ms Bennett and Education Minister Anne Tolley’s offices, neither of which acknowledged the request.Each time the request was transferred The Wellingtonian was told there would be another 20-day wait for a response.

When the 20 days to respond had expired, the only response we received from the Government was yet another transfer. Mr Joyce transferred the request at the last minute to Ms Bennett’s office.

Initially, when The Wellingtonian told Mr English’s office that we would be running a story on student loans, the office denied any talks about privatisation had taken place. Later that day Mr English’s spokesman demanded the right to comment before we published.

When we subsequently offered Mr English the chance to comment last Friday he declined and referred us to Ms Bennett. She also declined to comment, saying her office had never received the Official Information Act request. On Monday she then passed us on to Revenue Minister Peter Dunne.

Mr Dunne provided a brief written response to our inquiries about administration of the student loans on Tuesday.

“The Government aims to improve services,” he said. “Part of that includes the efficient administration of student loans and ensuring that all loan borrowers repay their loans in a timely manner.”

Mr Dunne denied the Government was planning to create a private student loan company, but said private debt collection practices might be used to collect from overseas borrowers.

“Regularity of payments tends to slip especially when borrowers move overseas,” he said.

“To improve the efficiency, officials have been investigating a number of options, including the possibility of private debt collecting.”

WHAT HASN’T BEEN CONFIRMED

These are the questions which have still not received full answers:

  • What is the share structure of the proposed student finance company?Will it be state-owned, privately-owned or a mixture of both?
  • How will the shares be issued?Will they be offered to the public?
  • Has a preferred owner been established? If so who? Or would ownership be split between banks?
  • Would the student finance company be empowered to deduct money directly from an employee’s pay or would the Inland Revenue Department still collect it?
  • When is the proposed student finance company expected to take over student loan collections?

Additional questions were also sent to Ms Bennett’s office last Friday. They were:

  • Will the payment exemption for low-income earners continue?
  • Will the company have the same power to impose late payment penalties and penalty interest as the Inland Revenue Department?
  • Will the company be able to seize property or other assets?
  • Will the company be able to restrain the travel of people with student loan debts?