NZ looks for allies to call in debt

The New Zealand government is holding talks with the Australian and British governments to establish if their tax systems can be used to recover loan debts from former students living overseas.

Steve Maharey, associate minister for tertiary education, said the government wanted to find ways to give former students "a facility to maintain a schedule of payments, so they don't have a large debt when they come home".

Inland revenue department figures show that more than 10,000 New Zealanders living overseas have student debts worth nearly NZ$136 million (£38 million).

Mr Maharey said that, in the 1990s, students accumulated large debts because of compounding interest. Under the Labour-Alliance coalition government, interest will no longer have to be paid on loans given during that period.

Mr Maharey said the Australian and British governments could collect student loan payments from New Zealanders through their tax systems, and forward the money to New Zealand.

It is understood New Zealand education minister Trevor Mallard raised the issue with British education secretary David Blunkett, during a recent visit to London.