Borrowing to study can be a great opportunity, though it’s important not to borrow more than we need. Under the Student Loan Scheme we can borrow money interest-free from the government to help pay for tertiary study, and repay the loan once we finish studying and start earning over a certain amount. If we move overseas after studying, though, we get charged interest on our student loans.
Student loans are ‘unsecured’ loans, meaning borrowers don’t have to provide an asset such as a house or car as security. They aren’t ‘means tested’, so what students or their parents earn or own doesn’t affect their ability to get a student loan.
However, students under 18 need parents’ consent to get a student loan.
There are three parts to a student loan. Students don't have to borrow all three parts.
If starting a part-time course after January 2012, you will only be able to get the compulsory fees part of the student loan for that course, unless you have been granted ‘limited full-time’ status by StudyLink.
If you're aged 55 years or over you will only be eligible for the compulsory fees part of the student loan.
You won't be able to borrow for a student loan if you have a student loan default of $500 or more when you apply, and at least some part of that amount has been overdue for a year or more.
The student allowance is a weekly payment for eligible students. Unlike a student loan, the allowance doesn’t have to be paid back.
If you receive the student allowance, the amount of student loan you can borrow for living costs goes down by the amount of student allowance you get after tax (not including the accommodation benefit payment).
You need to pay an establishment fee every time you apply for a student loan from StudyLink, which is added to your loan. An annual administration fee will be charged on your loan if you have a balance of $20 or more with Inland Revenue at the end of the tax year, until you fully repay your loan.
If you live in New Zealand, your student loan is interest free. Find out more about student loans at the Inland Revenue website.
In most cases, if you live overseas for more than six months (184 days or more) you will be charged interest on your student loan. Find out more about student loans when travelling or living overseas at the Inland Revenue website.
You need to start paying back your student loan once you earn over a certain amount every pay period. (This is called a ‘pay period repayment threshold’ and is based on the annual figure of $19,136.)
You need to use the ‘SL’ tax code. Your employer will make a student loan deduction from your salary or wages each pay period and pay this directly to Inland Revenue for you.
However, if you’re working while studying full time, you may qualify for an exemption from making student loan repayments and from using the ‘SL’ tax code.
If you have more than one job, you may be able to apply for a reduced deduction rate on your student loan for your secondary job. Apply for a repayment exemption or reduced deduction rate through Inland Revenue’s myIR online service.
You need to tell your employer if you have a student loan, no matter how much you earn. It's important to use the correct tax code and have the correct student loan repayments deducted from your pay.
The amount you have to repay (your repayment obligation) will generally be based on the pay period repayment threshold. For example, the student loan repayment rate is 12 cents for every dollar you earn over the weekly threshold if you’re paid every week.
Find out more about student loan repayments if working in New Zealand for salary or wages.
If you receive income other than salary or wages in New Zealand (e.g. you are self-employed, have business or rental income, income from interest and dividends, and casual agricultural or election day work income) your student loan repayment obligation will depend on how much your income is. You’ll be advised if you have a student loan repayment obligation and the amount you need to pay towards your loan.
Find out more about student loan repayments if self-employed or earning other income.
You can pay back more than the minimum repayment amount at any time.
If your student loan is interest-free, you won’t get any further into debt by paying only the minimum.
With most loans, the longer we have them the more interest we pay. Student loans are different because if we're living in New Zealand, we won't be paying interest.
But it’s important to remember:
Want to pay off a student loan faster? We can make extra student loan repayments at any time to Inland Revenue directly or by asking our employer to make extra deductions from our salary or wages.
Find out how to make extra repayments.
Work out how long it will take to repay the loan and the difference voluntary repayments could make – try the student loan repayment calculator on the Inland Revenue website.
Only our death or bankruptcy writes off a student loan. If under 18, we need our parents’ consent to take out the loan but that doesn't mean they're guaranteeing our loan. We’re still fully responsible for paying it back.
If we withdraw from study before our tertiary education provider's official withdrawal deadline, any refund for fees paid will be passed to StudyLink to reduce our student loan balance. If we withdraw after that deadline passes and do not qualify for a refund, we will still need to repay our student loan even if we don't complete the course.
Your loan doesn't go away if you leave the country. In fact, in most cases you’ll have to start paying interest if you leave the country for 184 or more consecutive days (about six months). Find out more about travelling or living overseas at the Inland Revenue website.
To arrange for a repayment holiday (of up to one year) you need to apply to Inland Revenue. You need to apply either before you leave New Zealand or within the first 183 days of being overseas. You also need to provide the details of someone in New Zealand who’s agreed to be a contact person on your behalf.
Repayment holidays don’t stop interest being charged on your loan though, so it’s still a good idea to make voluntary repayments to keep on top of things. It’s also helpful to nominate someone to act on your behalf while you’re away.
Unless you are on a repayment holiday, you need to make student loan repayments while overseas. These are based on your total loan balance and are generally due in two equal instalments on 30 September and 31 March.
You can pay these instalments either in a lump sum or by making smaller payments throughout the year, as long as the amount is paid in full by the payment dates above. There are late payment charges if you don’t pay on time.
Visit the Inland Revenue website for more information about making repayments when overseas.