The family is right to feel that that the result for their son is unfair - in other words that he is deemed a New Zealand tax resident by the IRD, while being deemed to be an overseas based borrower for student loan purposes. The good news is that there may be hope. Under section 25 of the Student Loan Scheme Act 2011 a borrower can apply to be treated as being New Zealand based on the basis that this is fair and reasonable. Being required to be overseas because of one's employment is one of the grounds that the borrower can advance.
There are many situations where a student loan borrower who is overseas could look at making a section 25 application. Given the potential interest savings, there is nothing to lose, and potentially much to gain, by doing so.