When people hear about debt consolidation, they often think it’s a magic fix - combine all your bills into one payment, lower the interest, and watch the stress disappear. But here’s the hard truth: not all debts can be wiped away, no matter how hard you try. Some debts stick with you forever, even after you’ve consolidated everything else. If you’re considering debt consolidation in New Zealand, you need to know which two types of debt absolutely cannot be erased.

Student Loans

In New Zealand, student loans are managed by the Inland Revenue Department (IRD). Unlike credit cards or personal loans, these debts don’t go away when you file for a debt repayment order, a summary instalment order, or even bankruptcy. The IRD doesn’t treat student loans like regular creditors. They have special powers. Even if you’ve moved overseas, stopped working, or declared insolvency, your student loan balance keeps growing with inflation adjustments. Interest doesn’t technically accrue, but the principal is adjusted annually to match the Consumer Price Index. That means your debt can grow just by living in an economy with rising prices.

Many people think paying off their student loan early is optional - it’s not. The government expects repayment once your income hits the threshold (currently $22,120 after tax per year). If you earn more, 12% of every dollar above that goes straight to your loan. There’s no forgiveness program. No settlement option. Even if you’re on a benefit, the debt remains. Consolidating your credit card debt won’t touch your student loan. It stays separate, always.

One real case from Auckland: a 32-year-old teacher paid off $18,000 in credit card debt through consolidation. But her $27,000 student loan? Still there. Five years later, it had grown to $31,000 just from inflation adjustments. She didn’t miss a payment - she just didn’t realize consolidation didn’t apply to it.

Child Support Arrears

Child support is another debt that refuses to disappear. Whether you owe $500 or $50,000 in unpaid child support, the Inland Revenue Department collects it aggressively. Unlike other debts, child support arrears cannot be included in a debt repayment plan, bankruptcy, or any form of consolidation. The law treats it as a priority obligation - not because it’s a loan, but because it’s money meant for a child’s basic needs.

IRD can garnish your wages, freeze your bank accounts, take your tax refunds, and even block your passport if you owe more than $5,000. They don’t negotiate. They don’t offer settlements. Even if you’re on a low income or facing hardship, the arrears stay on your record. You can’t restructure them. You can’t roll them into a new loan. And if you try to file for bankruptcy, child support arrears are explicitly excluded under Section 108 of the Insolvency Act 2006.

A Wellington father, who lost his job during the pandemic, fell behind on $14,000 in child support. He consolidated his medical bills and personal loan, thinking he was getting back on track. But the IRD kept taking 20% of his new part-time income. After two years, he owed $19,000 - not because he stopped paying, but because the arrears kept accumulating. He couldn’t consolidate them. He couldn’t erase them. He had to pay them, dollar by dollar, over time.

Why These Debts Are Different

These two debts - student loans and child support arrears - aren’t treated like consumer debt because they serve a public purpose. Student loans are government-funded education subsidies. Child support is a legal duty to care for dependents. Both are designed to protect long-term societal interests. That’s why the system doesn’t allow them to be discharged like credit card balances or payday loans.

Even if you work with a financial advisor or use a debt consolidation company, they can’t make these debts vanish. Some companies even mislead people by saying they can “reduce all debts.” That’s false. If they promise to erase student loans or child support, they’re either lying or don’t understand New Zealand law.

What you can do is manage them better. For student loans, make extra payments when you can - even small ones reduce the inflation adjustment effect. For child support, set up a direct payment plan with IRD. They’ll work with you to create a realistic schedule, but only if you reach out before they take drastic action.

What You Can Consolidate

Debt consolidation still works - just not for these two. You can combine:

• Credit card balances
• Personal loans
• Medical bills
• Utility arrears
• Overdrafts

These are unsecured debts with higher interest rates. Rolling them into a lower-interest consolidation loan can save you hundreds or even thousands of dollars a year. But always check your statement first. If your debt includes student loans or child support, they must stay out of the consolidation package.

What Happens If You Try to Hide Them?

Some people think if they don’t mention their student loan or child support arrears when applying for consolidation, they can sneak them out. That’s a dangerous mistake. Lenders and financial advisors are required to check your IRD records. If they find hidden debts, your application will be denied. Worse - if you lie on a formal debt agreement, you could face penalties or even legal action.

IRD cross-references all loan applications. If you apply for a consolidation loan and don’t disclose your student loan, they’ll find out. Same with child support. There’s no hiding. The system is built to catch it.

What Should You Do Instead?

Don’t try to erase these debts. Plan for them.

For student loans: Set up automatic deductions. Pay more when you can. Use any tax refund or bonus to chip away at the balance. Every dollar you pay now reduces the inflation adjustment later.

For child support: Contact IRD immediately if you’re struggling. They offer payment plans based on your income. Don’t wait until they take your passport or freeze your bank account. The sooner you act, the more control you have.

Use consolidation for the debts that can be consolidated. Treat student loans and child support as non-negotiable obligations. They’re not burdens to escape - they’re responsibilities to manage.

Common Myths About Debt Consolidation

• Myth: Consolidation wipes out all your debts. Truth: It only combines eligible debts. Student loans and child support are always excluded.
• Myth: Bankruptcy clears student loans. Truth: Not in New Zealand. Even after bankruptcy, you still owe them.
• Myth: You can negotiate child support down. Truth: Only the amount you pay per week can be adjusted - not the total arrears.
• Myth: Debt consolidation companies can help erase these debts. Truth: No legitimate company can. If they say they can, walk away.

Debt consolidation is a tool. It’s not a miracle. Knowing what it can and can’t do saves you time, money, and heartache.