Lana Oconnell
If you have a student loan in New Zealand, you may be wondering how it will be impacted if you move to another country. The amount of interest applied to your student loan and when repayments are due may be affected by the length of time you are out of New Zealand. If you are away from New Zealand for more than 6 months, you will be charged interest on your student loan. You will need to make minimum repayments on your loan or apply for a temporary repayment suspension. You can use a student loan repayment calculator to see how long it will take to pay off your loan.
| Characteristics | Values |
|---|---|
| Loan repayment when based overseas | Minimum repayments must be made or a temporary repayment suspension can be applied for |
| Repayment process when based overseas | Direct debit payments can be set up in myIR account |
| Interest charged when based overseas | People away from New Zealand for more than 6 months are charged interest on their student loan |
| Loan repayment when based in New Zealand | Repayments depend on how much the borrower earns |
| Loan repayment options | Regular weekly or monthly payments are recommended |
| Notification of minimum payments | An assessment notice is sent each year that tells the borrower the minimum payments they need to make |
| Due dates for minimum payments | 30 September and 31 March |
| Course of action if due dates have passed | The due dates may be adjusted |
| Basis of initial payment amount | The total loan balance on 31 March of the year the borrower is overseas-based |
| Loan repayment calculator | Available on the IR website to check how long it will take to pay off the loan |
| Notification of loan balance | When the loan balance is less than $1,000, the borrower is notified |
| Notification of loan repayment completion | Once the loan is paid off, the borrower is notified that student loan deductions are no longer required |
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What You'll Learn
Repaying an American student loan while in New Zealand
If you are a New Zealand citizen with an American student loan, you are required to make minimum repayments on your loan while you are based overseas in New Zealand. You can also apply for a temporary repayment suspension. It is recommended that you set up regular weekly or monthly payments to stay on track. You will receive an assessment notice each year that tells you the minimum payments you need to make. These payments are generally due by 30 September and 31 March. The amount you initially need to pay by each due date depends on your loan balance when you first become overseas-based, which is the day after you leave New Zealand. Your repayments are based on your total loan balance on 31 March each year you are overseas.
You can check what your student loan repayments will be and how long it will take to pay off your loan using a repayment calculator. You can also include 'extra payments' to see what effect they will have.
If you are having trouble repaying your student loan, you can find out your options on the IR website.
If you are a US citizen living in New Zealand with an American student loan, you can set up direct debit payments in your myIR account.
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How to set up direct debits from New Zealand
If you are looking to set up direct debits from New Zealand to pay off your American student loan, here is a step-by-step guide:
Firstly, you need to set up a direct debit agreement. This involves informing the bank of the account you will be using to make the direct debit payments. To do this, go to the homepage of your myIR account and select 'Manage my profile' under the 'I want to...' tab. From the options presented, select ''Manage payment channels' and then 'Set up a direct debit authority'.
You will then be prompted to enter the full name of the account holder and your bank account details. If you are paying from a bank account in New Zealand, you may need to enter additional information depending on the specific bank. You will also have the option to use the default personalised name that myIR creates for your account or create your own.
After entering the required information, click 'Next'. It is important to review the information you have entered for accuracy. If everything is correct, you can read the terms and conditions. If you agree to the terms and conditions, tick the box to confirm your acceptance. Finally, click 'Submit'. You should receive a message immediately confirming that your direct debit authority has been approved.
If you are a business looking to set up direct debits, you can use a direct debit management service such as Debit Success. They offer a comprehensive direct debit management system and work with a range of subscription-based businesses.
It is important to note that New Zealand-based student loan deductions will be credited towards your overall loan balance. These payments will not be counted towards your overseas-based assessment.
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Interest rates on American student loans in New Zealand
Student loans in New Zealand are managed by the Inland Revenue Department (IRD) and the Ministry of Social Development. Student loan interest rates in New Zealand are set at the start of each tax year, on 1 April. The annual interest rate is currently 4.9%. This is calculated daily and added to the loan balance at the end of the tax year. The daily rate is 0.01342%. Late payment interest is charged at 8.9% (or 0.713% monthly), but this can be reduced to 6.9% (or 0.557% monthly) if the borrower contacts the IRD about late payments and arranges an instalment plan.
Student loans are interest-free for as long as the borrower is living in New Zealand. However, if a borrower leaves New Zealand for longer than six months, interest is added to their loan at a rate of 4.9%. The length of time spent out of New Zealand can affect how much interest is applied to a student loan and when repayments are due.
Repayments on a New Zealand student loan depend on how much the borrower earns and whether they are based in New Zealand or living overseas. Repayments are required as soon as the income threshold of $22,828 (2024 tax year) is met by the borrower, even if they are still studying. The loan repayment rate is 12% of every dollar over the income threshold. Borrowers with more than one job can apply for a student loan special deduction rate for secondary earnings.
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Temporary repayment suspensions
If you are a New Zealand citizen with a student loan and are moving overseas or are already overseas-based, you will need to make minimum repayments on your student loan. If you are unable to make these payments, you can apply for a temporary repayment suspension. The amount you initially need to pay depends on your loan balance when you first become overseas-based, which is the day after you leave New Zealand. Your repayments are based on your total loan balance on 31 March each year you are overseas-based.
If you are a borrower of a federal student loan in the US, you can also apply for a temporary suspension of your loan repayments. This is called forbearance or deferment. If you are in an interest-free forbearance or deferment, you will not need to make any payments, but interest may accrue. You can apply for an income-driven repayment plan, which will allow you to make payments relative to your income.
The US Department of Education has also offered a SAVE Plan, which placed borrowers' federal student loans in forbearance with a 0% interest rate. However, a federal court blocked parts of the SAVE Plan, and borrowers will be responsible for making monthly payments that include any accrued interest as well as their principal amounts.
If you are having trouble repaying your student loan, you should check the IR website for more information about your options.
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How to make payments from overseas
If you are a US citizen with a federal student loan living in New Zealand, you will need to make minimum repayments on your student loan or apply for a temporary repayment suspension. You can get someone to act on your behalf in the US. It is recommended that you set up regular weekly or monthly payments to stay on track.
Your student loan repayments are based on your loan balance when you become overseas-based, not your total income. However, there are some countries where you are still treated as being US-based. If you are outside of the US for around 5 out of 6 months, you might become overseas-based and your student loan will stop being interest-free. Your loan repayments will be based on the size of your loan balance and your loan could start getting bigger.
You will receive an assessment notice each year that tells you the minimum payments you need to make. Your payments are generally due by 30 September and 31 March. If one or both of these dates have passed by the time you are notified, these dates may be adjusted. The amount you initially need to pay by each due date depends on your loan balance when you first become overseas-based, which is the day after you leave the US. Your repayments are based on your total loan balance on 31 March each year you are overseas-based.
If you live in Australia, the United Kingdom, Europe, Canada, or the United States, you can set up direct debit payments in your myIR account. You can also use a repayment calculator to check what your student loan repayments will be and how long it will take to pay off your loan. You can even include 'extra payments' to see the effect they will have.
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Frequently asked questions
You can set up direct debit payments in your myIR account. You will need to make minimum repayments on your student loan or apply for a temporary repayment suspension.
You can use the New Zealand student loan repayment calculator to see how long it will take to pay off your loan and how much you need to pay.
Interest will continue to be charged on your loan, so it is a good idea to make voluntary repayments.
You can apply for a temporary repayment suspension of up to 1 year.
