The government is being told it should be more willing to write off debts run up by beneficiaries to pay for basic living costs such as school uniforms, power bills and car repairs.
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Almost $550 million is owed to the Ministry for Social Development for recoverable hardship assistance and grants - up more than $100 million on what it was four years ago.
Recoverable assistance is a one-off payment to help pay an essential or emergency cost, if someone can't pay it another way.
The grants can be used to pay for things like bond and rent, car repairs, school costs, household items like whiteware and furniture, and utilities.
But budget advisers and beneficiary advocates say too many people are being trapped in a cycle of debt - and benefit levels need to rise.
Nelson Budget Service manager Rosalie Grant said some of the people coming to them for help have MSD debts of up to $5000.
Some of that would be recoverable assistance, but it could also include debt because they've been overpaid benefits or other entitlements.
Ms Grant said even though the repayments are interest free, and the maximum weekly repayment is $40, people can struggle to repay them and cover the rest of their living expenses.
"It's worth thinking about why people are borrowing for essential needs in the first place. If the income levels could rise, then they wouldn't need to borrow in the first place, it sets them into a cycle of debt," she said.
Karen Pattie from the Beneficiaries Advocacy and Information Service on Auckland's North Shore said people who are borrowing money for their kids' school uniforms and education shouldn't have to pay those grants back.
She said it quickly gets expensive if you have, for example, two children at intermediate and high school.
"They're starting off with $2000 worth of debt at the beginning of the school year and obviously that goes down and up depending on their needs, but you get to the end of their school life and you've got your bond, it's a lot of money."
Tim Barnett from FinCap said even if people are on the benefit, they should still be able to save for emergencies or other essentials.
He said the government could look at incentive schemes to write down people's debt as they move off the benefit into employment.
"Rather than have that debt hanging around your neck for your whole life, the key thing is to get you into work, into employment, into training, and any kind of incentive where as you advance through that process, maybe some of the debt can be written off, that would be a constructive approach to take."
Rosalie Grant said a debt amnesty for recoverable grants would have an even greater impact.
"If there was an amnesty, if they didn't have to pay that, it would be of immense benefit. Even $5 a week, it would make an enormous difference to the families that we're seeing. That money would be better spent on their children."
Ministry of Social Development Group general manager client service support George van Ooyen said their power is limited when it comes to writing off debt, even if someone is facing serious financial hardship.
"If we've gone back and reviewed a decision that we've made and we've determined that something should have been non-recoverable, then we would reverse that cost out in that situation," he said.
"Outside of where we've made an administrative error, we don't have the legislative authority to write off debt."
Mr van Ooyen said Work and Income case managers will talk to clients about what repayments they can afford, and MSD can renegotiate repayment levels or temporarily suspend repayments.