New Zealand lawyer secures $100,000 student loan debt relief

An Auckland-based lawyer has helped an overseas student loan borrower secure more than $100,000 in debt relief, highlighting a little-known scheme that could offer a financial lifeline to New Zealanders struggling with long-overdue student loans.

Lawyer Dave Ananth, who represents borrowers facing substantial student loan debt, said he receives around 20 calls a week from overseas borrowers anxious about mounting liabilities and unsure how to negotiate with Inland Revenue (IRD).

Many callers are based in Australia and want to return home, while others contact him from Europe and South Africa.

For some, the debt has grown far beyond the original amount borrowed. Ananth said borrowers often struggle to comprehend how a student loan of $20,000 taken out two decades ago could swell to $80,000.

"They're overwhelmed by the debt and don't know how to deal with Inland Revenue," he told Nine to Noon.

A change in the law in April expanded the IRD commissioner's powers to provide relief from interest on loans held by borrowers living overseas. Previously, the commissioner could reduce penalties imposed when overseas-based borrowers failed to make payments on time.

Under the scheme, borrowers can seek remission of interest and penalties by submitting supporting documents. Ananth said he has helped clients secure substantial reductions, in some cases cutting interest by as much as 50%.

He recently secured more than $100,000 in relief on penalties and interest for a borrower with a particularly large outstanding loan.

However, the scheme comes with a significant condition. Borrowers must be willing and able to settle their outstanding debt within a month once an agreement is reached.

"If settlement is reached, you've got a 30-day window to settle," Ananth said.

Despite the potential savings, he believes many eligible borrowers remain unaware that they can negotiate a reduction in their outstanding liabilities.

Some are unaware they can even request relief from penalties, while others find the process so intimidating that they avoid dealing with the debt altogether, he said.

Ananth called for greater public awareness, urging Inland Revenue to communicate the available options more widely so borrowers can understand their rights and explore possible settlements.

His approach is aimed at reaching a compromise that benefits both the borrower and the government, he said.

A settlement allows the government to recover the original loan, along with some costs and interest, while enabling the borrower to close an account that may have accumulated for years.

The issue comes as penalties on overdue student loans continue to rise. Inland Revenue's latest annual report shows total penalties charged to borrowers have reached $1.27 billion, approaching the $1.4 billion in original loans that remain overdue.

The department also reported a 26% increase in money collected from overseas borrowers in the year to June compared with the previous year, attributing the improvement partly to increased contact with borrowers living abroad.