John MacDonald: Student loans should be paid back, but is this the solution?

Author: John MacDonald,
Publish Date: Mon, 31 Aug 2026, 12:33pm

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Instead of cracking down on New Zealanders with student debt living overseas, we should be making things easier for them. Especially, if we want them to come back.

Tell that to the National Party, though. Which has announced that, if it forms the next government, it will be going after graduates overseas with student loans and doing nothing about it.

The ones who account for 93 percent of the student debt that needs to be paid back.

National is promising to make life a bit easier for graduates living here. Giving them more time to pay off their loan with lower repayment rates.

But the ones overseas will face higher interest and tougher penalties if they don’t pay it back when they should.

Which makes no sense to me. Especially, if we want to get these people back to New Zealand.

How the system works, is that anyone with a student loan who moves to another country gets hit with interest. Which means more debt to pay-off.

If you’ve graduated and you’ve got a student loan to pay off and you’re in New Zealand, no interest. But the minute you go overseas to live, the interest starts getting added. And you’re expected to make two lump-sum payments every year.

Not everyone does, though. And these are the ones National has in its sights.

With Nicola Willis saying the taxpayer has subsidised their education and, if they choose not to use their skills to contribute to New Zealand society, then two things are needed: they need to pay more for the privilege of the taxpayer subsidising them and there needs to be consequences if they don’t follow the rules.

I agree there needs to be consequences for not paying it back. Because a loan is a loan. But what National is proposing isn’t the answer.

Because this so-called crackdown won’t do anything for the New Zealanders overseas who are way behind in their student loan payments and are too scared to set foot here because they think they’ll be arrested at the border.

It’s crazy to get all hardcore on it when some people are already too scared to come back.

The thing is, too, it’s all very well going overseas. But that doesn’t mean people walk into well-paying jobs. The grass doesn’t always turn out to be greener.

Which is why I think a much better approach would be to be a bit flexible with these people.

What would be wrong, for example, with IRD talking to them and seeing if they might qualify for some grace on the basis of hardship? Or agreeing to letting them come back, pay a few hundred bucks for a start and see how it goes.

I wouldn’t have any problem with that. Because what would you rather have? These people stuck overseas owing all this money? Or would you rather they were here using their skills and knowledge and making a genuine contribution to the country?

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