Doctor arrested for $180,000 worth of student loan debt

A student loan lawyer is warning people not to put their "head in the sand" when it comes to paying a student loan while overseas.

Last month a doctor was arrested at Wellington airport before trying to fly home to Australia due to defaulting on a decades-old student loan.

With penalties, the loan had ballooned to about $180,000. The doctor's brother owes more than $300,000.

Almost 114,000 people living overseas have student loans, and almost 70 percent of them are in default; owing about $2.5 billion.

The doctor's lawyer, Dave Ananth, told Checkpoint a lot of people come to him because their circumstances change and they experience issues when travelling.

"They thought ok, we'll come back to the student loan a little when things settle down - that never happens and then after 15, 20 years you get a massive bill from IRD."

The former IRD prosecutor turned student loan lawyer had dealt with a few hundred cases over the last few years and said he didn't feel there was an attitude that people just did not want to pay.

"None of them have said look I'm not paying my student loan, it's a lot of remorse... things didn't work out."

He said illness, family break ups, divorces and loss of job opportunities often led to student loan debt piling up.

Ananth said he was actively getting calls from people who wanted to sort their student loan out.

He explained that loans overseas could quickly snowball and build up with changing interest rates and penalties.

"As of April 1st, this year - every year the interest changes - it's 5.6 percent. If you don't pay that, there's penalties of 9.6 (percent), that's compounded daily."

The more a student loan was ignored the more it compounded, he said, and after about 20 years a $30,000 loan can turn into $120,000.

Ananth said there was some flexibility with provisions under the Student Loan Scheme Act where people can look at remissions of, not all, but some, penalties.

"There are provisions, but what I'm saying is engage.

"Ultimately, I think it's a student loan debt, it's taxpayer funded, you've got to pay it back."