Lori Meadows
Paying off your student loan faster frees up your money for other financial goals. Student loan payment terms depend on your income, job, and location. In New Zealand, student loans are interest-free if you stay in the country, but you may be charged interest if you go overseas. You must start making repayments once you earn over $24,128 a year before tax. You can make extra repayments to pay off your loan faster, but if you have high-interest credit card debt or a personal loan, it may be better to tackle these first.
| Characteristics | Values |
|---|---|
| Interest charged on the loan | Interest-free for New Zealand citizens and residents living in New Zealand; interest charged for those living overseas |
| Annual repayment threshold | $24,128 |
| Repayment rate | 12% of every dollar earned over the repayment threshold |
| Repayment options | One-off payments, extra repayments, special deduction rates |
| Benefits of early repayment | No accrued interest, improved ability to secure lending, ability to pursue other financial goals |
| Drawbacks of early repayment | May be better to tackle high-interest credit card debt or personal loans first |
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What You'll Learn
Student loans are interest-free for New Zealand residents
Student loans in New Zealand have been interest-free for full-time students living in the country since 2006. Interest is only charged on student loans if the borrower moves overseas for longer than six months. In this case, interest is added to the loan at a rate of 4.9%.
If you are a New Zealand resident with a student loan, you can make extra repayments to pay off your loan faster. You can use the Student Loan repayment calculator on the Inland Revenue website to see how long it will take you to pay off your loan, including any extra repayments. You can also apply for a special deduction rate if you have more than one job and earn less than the pay period repayment threshold from your main job.
If you are having difficulties meeting your repayment requirements, the Inland Revenue Department (IRD) may offer repayment options and a reduced late payment interest rate if you contact them.
It is important to note that while student loans are interest-free for New Zealand residents, there is an administration fee of $40 if your student loan balance is $20 or more at the end of the tax year.
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How to make extra repayments
Student loans can be a burden, but there are ways to pay them off faster. Here are some detailed tips on how to make extra repayments:
Check your loan balance and repayment thresholds
Firstly, it's important to understand your loan balance and repayment thresholds. You can check your loan balance through Inland Revenue's online service, myIR. The repayment threshold for the 2026 tax year is an annual income of $24,128, or $464 per week before tax. If you earn above this threshold, you are required to make repayments.
Understand the impact of interest
If you are a New Zealand resident, your student loan is interest-free. However, if you move overseas, you may be charged interest, depending on how long you stay abroad. Interest accrued on student loans can increase the overall cost of repayment, so it is beneficial to minimise interest by staying up-to-date with repayments.
Make extra repayments
You can make extra repayments to your student loan, which will help you pay it off faster. You can ask your employer to make these extra repayments from your income, even if you earn below the repayment threshold. Alternatively, you can make one-off payments directly.
Establish a college repayment fund
Consider setting up a college repayment fund, where part of your salary is automatically transferred each month towards your student loan. This ensures you don't forget to make payments and helps you stay on track with your repayment goals.
Take on additional work
If possible, consider taking on a part-time job while studying to start paying off your loan early. This can help you reduce the overall loan amount and give you a head start on your repayment journey.
Remember, it is essential to consider your financial situation and seek professional advice when making decisions about loan repayments.
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Repaying your loan when you're self-employed
If you're self-employed, the amount you pay towards your student loan each year is 12% of every dollar you earn over the repayment threshold. For the 2025 and 2026 tax years, the annual repayment threshold is $24,128.
Adjusted net income is any income you earn that is not a salary or wages, minus any expenses. If you have an adjusted net income, you will have an end-of-year repayment obligation.
You can make extra repayments to your loan if you want to pay it off faster. You can use the student loan repayment calculator to see how long it will take you to pay off your loan, including any extra repayments.
If you're self-employed and living in New Zealand, the length of time you are out of the country for can affect how much interest is applied to your student loan and when repayments are due. Check the IR website for more information.
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The impact of travelling overseas
Travelling overseas can have a significant impact on your student loan repayment process and the overall cost of your loan. Here are some key points to consider:
Interest Charges
If you decide to travel overseas, your student loan will no longer be interest-free from the day after you leave New Zealand. Interest will be applied to your loan balance, potentially increasing the overall cost of your loan. The longer you stay overseas, the more interest may accrue.
Repayment Suspensions
Before travelling overseas, you must contact Inland Revenue to discuss your student loan repayments. You may be eligible for a temporary repayment suspension during your time abroad. However, if you do not have a suspension, interim student loan repayments will still be due, and you may need to continue making payments while overseas. These interim payments count towards your end-of-year repayment obligation.
Repayment Calculations
When you become overseas-based, your student loan repayments will be calculated based on your loan balance when you left New Zealand, rather than your total income. If your loan balance increases, your repayments may also increase. However, if your balance decreases, your repayments will not be adjusted downwards.
Tax Status
If you stay overseas for an extended period, you may become a non-resident taxpayer. Being overseas-based for tax purposes can impact your student loan repayments and other financial obligations. It's important to understand the tax implications of your travel plans.
Alternative Contact
While travelling, it's a good idea to nominate an alternative contact person for your student loan account. This person can help keep you updated on your loan and communicate with the relevant authorities on your behalf if needed.
In summary, travelling overseas can have a significant impact on your student loan repayment process, including the accrual of interest and changes to repayment calculations. It is important to carefully consider these factors and plan your finances accordingly before embarking on extended travel while repaying a student loan.
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How to avoid defaulting on your loan
To avoid defaulting on your student loan, it is important to make your loan repayments on time. If you are finding it difficult to make your loan repayments, there are several options available to you:
- You can apply to lower the deductions from your New Zealand salary or wages if you are in any of the following situations: you are studying full time and earning under the annual repayment threshold, you have more than one employer and your main income is under the annual threshold, or your salary and wage deductions are putting you in hardship. To do this, go to your student loan account in myIR and select 'Apply for a reduced deduction rate'.
- If you are about to move overseas or have recently left, you can take up to a 12-month break from repaying your student loan.
- You can apply to negotiate your repayments for the current year if you need to make them more affordable. You can send a student loan overseas-based customer relief application or request an instalment arrangement or apply for financial relief.
- 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.
- If you think the deductions are too high and you have more than one source of income, you may be able to apply for a special deduction rate from Inland Revenue.
- If you earn over the pay period repayment threshold but less than the annual repayment threshold, a student loan repayment deduction exemption may be the best option.
It is important to note that if you do not make your payments on time, you may be charged late payment interest. Additionally, if you go overseas, you may be charged interest, depending on how long you stay abroad.
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Frequently asked questions
You need to start making repayments once you earn over $24,128 a year before tax ($464 a week before tax). You can check your loan balance in Inland Revenue's online service, myIR.
The amount you pay depends on your income. You pay 12% of every dollar you earn over the repayment threshold. You must add 'SL' to your tax code to tell your employer that you have a student loan.
You can make extra repayments on your loan. You can ask your employer to make these extra repayments, or you can make a one-off payment.
You may be charged interest on your loan if you go overseas. You need to contact Inland Revenue before you leave New Zealand.
