Ibrahim Gardner
Student loans in New Zealand are interest-free as long as the borrower remains living in the country. The Inland Revenue Department (IRD) manages repayment of student loans, and the amount to be repaid is calculated based on the borrower's income. Repayments are deducted directly from the borrower's salary or wages. If a borrower is self-employed or has any other taxable source of income, they must advise the IRD so that the repayable amount can be calculated. Student loan repayments can be suspended on request for those on no/low income. However, interest accumulates on the loan if the borrower moves overseas for more than six months.
| Characteristics | Values |
|---|---|
| Interest charged on student loans in NZ | No, as long as the borrower is living in New Zealand |
| Interest charged on student loans for NZ residents going overseas | Yes, if the borrower is overseas for more than 6 months (184 days or more) |
| Interest charged on student loans for overseas residents coming to NZ | Yes, if the borrower is overseas-based |
| Interest charged on late payments | Yes, at a rate of 6.8% or 8.9% |
| Reduced late payment interest rate | Yes, if the borrower contacts the IRD about the late payments, at a rate of 4.9% or 6.9% |
| Annual interest rate | 4.9% |
| Late payment interest rate | 8.9% |
| Reduced late payment interest rate | 6.9% |
| Repayment threshold | $22,828 (2024 tax year) |
| Minimum mandatory repayment | $367 a week |
| Student loan repayment rate | 12 cents for every dollar you earn over the weekly threshold |
| Administration fee | $40 |
| Establishment fee | Applicable |
| Annual administration fee | Applicable if the balance is $20 or more |
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What You'll Learn
Student loans are interest-free if you stay in New Zealand
Student loans in New Zealand are interest-free for borrowers who live in the country. This means that if you are a borrower and you stay in New Zealand, you will not pay interest on your student loan. However, if you are self-employed or have any other taxable source of income, you must inform the Inland Revenue Department (IRD) so that they can calculate the amount you need to repay. The IRD also offers repayment options and reduced late payment interest rates if you contact them about late payments.
If you move overseas after taking out a student loan in New Zealand, you will be charged interest on your loan in most cases. The interest rate is set at the start of each tax year on April 1 and is currently 4.9%. If you are overseas-based, you can apply to keep your student loan interest-free under certain circumstances, such as unexpected travel requirements or serious illness. You will generally be considered a New Zealand resident for interest-free loan purposes if you live in Niue, the Cook Islands, Tokelau, or Ross Dependency. Additionally, if you are overseas for less than 10 months (325 days), you will still be considered a New Zealand tax resident.
The Student Loan Scheme in New Zealand allows borrowers to take out interest-free loans from the government to fund their tertiary studies. Repayments are typically deducted automatically from the borrower's salary or wages. However, if you have multiple sources of income, you may be able to apply for a special deduction rate. It is important to note that loan repayments can be suspended if you have no or low income, but interest may still accumulate.
The introduction of interest-free student loans in New Zealand was implemented by the 5th Labour government led by Prime Minister Helen Clark. This change removed interest charges for full-time, full-year students and part-time or part-year students with low incomes. The minimum mandatory repayments have since been raised for individuals earning more than $367 per week, and the University Students Association has criticised this change, arguing that it could reduce demand for tertiary education and encourage graduates to leave the country.
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Late payment interest is charged at 6.8%
Student loans in New Zealand are interest-free as long as the borrower remains living in the country. However, late payment interest may be charged on overdue amounts. This only applies if the overdue amount is $334 or more, and the borrower will continue to be charged until they have caught up with their payments. The late payment interest rate is currently 6.8%.
If a borrower is experiencing difficulties meeting the repayment requirements, the Inland Revenue Department (IRD) may offer repayment options and a reduced late payment interest rate. Borrowers can contact the IRD about late payments to arrange an instalment plan and pay less interest. The reduced late payment interest rate is currently 6.9%, calculated as a monthly rate of 0.557%.
Borrowers who leave New Zealand for longer than six months will be charged interest on their student loan at a rate of 4.9%. However, there are some situations where interest is not charged. For instance, if the borrower travels overseas due to an unexpected delay in returning to New Zealand or a serious illness that prevents them from engaging in paid work.
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Loan repayment thresholds
Student loans in New Zealand are interest-free if you stay in the country. However, if you become overseas-based, interest will be added to your loan. The interest rate is set at the start of each tax year on 1 April and is currently 4.9%. Interest is calculated daily on the loan balance, and interest is charged on this interest annually after 31 March.
In terms of loan repayment thresholds, the amount you must pay towards your student loan each year is 12% of every dollar you earn over the repayment threshold. For the 2026 tax year, the annual repayment threshold is $24,128. This threshold can be broken down into pay period thresholds. For example, in the 2026 tax year, if you earn $600 a week before tax, your repayment will be $16.32. You can calculate this as follows:
- $600 (weekly pay before tax) − $464 (weekly repayment threshold) = $136
- $136 (income over the repayment threshold) × 12% (repayment rate) = $16.32
The repayment threshold does not apply to secondary jobs as it has already been considered with your main job. This means you repay 12% of every dollar you earn from any secondary jobs. For example, if you earn $200 a week before tax in a secondary job, your repayment will be $24:
$200 (weekly pay before tax) × 12% (repayment rate) = $24
If you have more than one job and earn less than the pay period threshold from your main job, you can apply for a special deduction rate for your secondary job. This allows the unused amount of the pay period threshold to be applied to your secondary income, reducing your repayments.
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Applying for a student loan special deduction rate
If you're finding it hard to make your student loan repayments, you can apply for a special deduction rate. This will reduce the amount you need to pay each week or month.
To apply for a special deduction rate, you'll need to contact Studylink, the government agency that handles student loans in New Zealand. You can call them, visit a service centre, or apply online through your myIR account.
When applying, you'll need to provide detailed information about your income, expenses, and overall financial situation. This includes documents related to your salary or wage, any benefits or allowances you receive, and your regular living expenses such as rent, groceries, transportation costs, and other relevant financial commitments.
It's important to be as thorough as possible in detailing your financial circumstances, as this will help Studylink accurately assess your ability to make repayments. They may request additional documentation or supporting evidence, so be prepared to promptly provide any further information they may require, such as pay slips, bank statements, or other relevant records.
Once your application has been received and reviewed, Studylink will determine your eligibility for a special deduction rate based on their assessment of your financial situation. If your application is successful, they will inform you of the updated repayment amount and the duration for which the special deduction rate will be applicable.
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Interest rates for overseas-based students
If you are an overseas-based student with a New Zealand student loan, interest will be added to your loan balance. The interest rate is set at the start of each tax year on 1 April and is currently 4.9%. Interest is calculated daily on your loan balance and included in your loan balance, but it is only charged on this interest after 31 March each year.
There are some situations where your loan may remain interest-free when you are overseas. You may also be able to apply for a temporary repayment suspension. You can check your interest status and see when your loan will be interest-free by logging into your student loan account and selecting 'More', then 'Travelling Overseas'.
If you do not make your payments on time, you may be charged late payment interest. The late payment interest rate is currently 8.9%, but you may be able to reduce the amount by contacting the relevant authority and arranging an instalment plan.
It is important to note that New Zealand-based student loan deductions made while you are overseas-based will not be credited towards your overseas-based assessment. These will be credited towards your overall loan balance. You can set up regular weekly or monthly payments, and you will receive an assessment notice each year that tells you the minimum payments you need to make.
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Frequently asked questions
No, student loans in New Zealand are interest-free as long as you are living in the country.
If you leave New Zealand for more than six months (184 days or more), your student loan will accrue interest. However, there are some situations where interest is not charged, such as if you have a serious illness, injury, or disability that prevents you from working.
The interest rate for student loans is set at the start of each tax year on April 1. The current annual interest rate is 4.9%. This rate is applied to your loan balance daily.
