Lana Oconnell
If you're self-employed, you're responsible for managing your student loan repayments. The amount you pay depends on your income and whether you're based in New Zealand or overseas. In New Zealand, if you earn above the repayment threshold, you're required to pay 12 cents of every dollar earned over that threshold. For example, if you earn $85,000 in self-employed income, your student loan repayment obligation is $7,460.64. It's important to make your repayments on time to avoid late payment interest, and to save for your repayments throughout the year.
| Characteristics | Values |
|---|---|
| Who needs to make their own student loan repayments? | Self-employed individuals or those who earn income other than salary or wages |
| How much do self-employed individuals need to pay? | 12% of every dollar earned over the repayment threshold |
| What is the repayment threshold? | $24,128 for the 2026 tax year (1 April 2025 to 31 March 2026) and $24,128 for the 2025 tax year (1 April 2024 to 31 March 2025) |
| When do self-employed individuals need to make repayments? | Typically at the end of the tax year when filing income tax returns |
| Are there late payment penalties? | Yes, late payment interest may be charged if payments are overdue |
| Are there interim payments? | If the end-of-year loan repayment is more than $1,000, three interim payments based on the previous year's repayment amount plus 5% are required during the following tax year |
| How do self-employed individuals make repayments? | Through their myIR account, which offers payment options such as direct debit, internet banking, and credit or debit card payments |
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What You'll Learn
Self-employed loan repayment calculator
As a self-employed individual, you are responsible for managing your student loan repayments. The amount you repay depends on your salary and wage income, plus any adjusted net income. Adjusted net income refers to any income you earn that is not a salary or wage, minus any expenses.
If you are a UK resident and studied in the UK, you are likely to have been assigned one of the following student loan plans:
- Plan 1: Scottish and Northern Irish students who took out loans from 1 September 1998 onwards, and English and Welsh students who took out loans from 1 September 1998 to 31 August 2012. Students on this plan start paying back their loan when their annual salary exceeds £19,390, or £24,990 according to another source.
- Plan 2: For students who took out their loan after 1 September 2012 in England or Wales. Under this plan, you'll start to pay off your loan once your annual earnings exceed £26,575, increasing to £27,295 for 21/22.
If you are a sole trader in New Zealand, you will need to pay 12 cents of every dollar you earn above the repayment threshold, which is currently NZ$24,128. This means that if you earn NZ$85,000 in self-employed income, your student loan repayment obligation is NZ$7,460.64.
If you are thinking of working overseas, it is worth checking with the body that manages your loan to see how this will affect your repayments. You may be charged interest if you go overseas, depending on how long you go for.
There are online student loan repayment calculators available that can help you understand how long it will take to pay off your loan.
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Sole trader repayment guide
If you're a sole trader in New Zealand, you're responsible for managing your own student loan repayments. Here's a guide to help you navigate the process:
Understanding Your Repayment Obligation
As a sole trader, your student loan repayments are typically calculated based on your adjusted net income, which is your total income minus any expenses. If your adjusted net income exceeds the annual repayment threshold, you are required to make repayments. For the 2026 tax year (1 April 2025 to 31 March 2026), the annual repayment threshold is $24,128. This means you'll need to pay 12 cents for every dollar you earn over this threshold.
Making Repayments
Student loan repayments for sole traders are generally made at the end of the tax year when filing your income tax return. However, if your end-of-year loan repayment exceeds $1,000, you'll also need to make three 'interim repayments' during the following tax year. These interim payments are calculated based on your previous year's repayment amount plus 5%.
Staying Organized
It's important to stay organized and save for your student loan repayments throughout the year. That way, you can avoid a large bill at the end of the financial year. You can use online tools like Hnry, a financial administration service designed for sole traders, to help manage your repayments and stay on top of your annual tax returns.
Interest and Overseas Travel
Your student loan is generally interest-free as long as you remain in New Zealand. However, if you go overseas, the interest applied and repayment amounts may depend on the length of your stay and the country you're visiting. Before travelling internationally, be sure to check the IR website for information on minimum repayments and interest rates for your destination.
Late Payments
It's important to make your student loan payments on time. If you don't, you may be charged late payment interest if the overdue amount is $334 or more. Late payment interest rates change yearly, and you may also be charged interest if you return to study.
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Managing repayments while overseas
If you are self-employed and plan to live outside the UK for more than three months, you must update the Student Loans Company (SLC) before you leave. You will be asked to complete an 'Overseas Income Assessment Form' (OVFA), giving details of your income and employment status. You will have to return the form with evidence displaying how much you currently earn and if you are eligible to repay the loan. The evidence you'll have to provide differs depending on your employment status. If you are self-employed, you will need to provide a bank statement confirming your gross annual income.
The SLC will then send you a letter detailing your repayment plan. The repayment threshold when living abroad may not be the same as in the UK because of differences in living costs. The SLC works out what the equivalent repayment threshold is in your new country of residence and calculates your repayments. Interest rates are applied in the same way as they are when you live in the UK. You can use the SLC table to view the upper and lower income thresholds for each country, which will determine the level of interest you'll repay on top of your current student loan.
If you do not update the SLC about your circumstances, you may incur penalties. If you move outside the UK for less than three months, you will continue to be treated as a UK taxpayer. If your time in the UK then exceeds three months, you must let the SLC know, as your repayment status will revert to that of a UK taxpayer. If you don’t update SLC, you may end up making repayments both by direct debit as an overseas re-payer and via Pay As You Earn (PAYE) if you find employment in the UK.
If you are self-employed, you will need to fill out a Self-Assessment tax return. Your repayment amount will be the same regardless of your employment status. If you are in a position to pay back more than your student loan requires, you can make extra payments. However, Martin Lewis, author of the popular blog MoneySavingExpert.com, argues against this approach. Lewis argues that as student loans don’t affect your credit ratings, are low interest, and are automatically written off after 30 years, there’s no incentive to pay them off early.
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Late payment interest and penalties
In New Zealand, student loans are generally interest-free, but if you don't make your payments on time, you may be charged late payment interest. Similarly, in the UK, you must submit your Self-Assessment tax return, including your student loan repayments, by 31 January each year to avoid fines and penalties. If you're unsure about how to manage your student loan repayments as a self-employed individual, it's recommended to seek expert advice.
If you're facing difficulties in making your student loan payments, there are a few options to consider. You may be able to take the student loan interest deduction on your taxes if you meet certain criteria, such as having a modified adjusted gross income (MAGI) below a specified amount. Additionally, refinancing your student loan may help lower your monthly payments by extending your loan term or securing a lower interest rate. However, refinancing federal loans may result in losing access to certain benefits and protections.
It's important to be proactive and plan your repayments to avoid late payment interest and penalties. Consider seeking professional advice or using financial administration services specifically designed for sole traders to manage your student loan repayments and stay on top of your financial obligations.
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Tax codes and deductions
When it comes to paying off your student loan as a self-employed individual, there are a few things to keep in mind regarding tax codes and deductions.
Firstly, it's important to understand that your student loan repayments are calculated based on your annual income before tax. The specific repayment plan you're on will determine the threshold above which you'll need to start making repayments. For example, if you're on Plan 1 in England or Wales, you'll start repaying your loan once your annual earnings exceed the threshold, which is currently set at £19,895. The amount you'll pay is calculated as a percentage of your income above this threshold.
As a self-employed individual, you'll need to fill out a Self-Assessment tax return, which includes declaring your student loan repayments. This process can be a bit more involved compared to being an employee, where student loan repayments are simply deducted from your wages. Make sure to submit your Self-Assessment tax return by the deadline of January 31st each year to avoid penalties and interest on late payments.
Now, let's discuss tax deductions. Unfortunately, student loan repayments themselves are not tax-deductible for self-employed individuals in the UK. However, if you're in the US, you may be eligible for tax deductions on the interest you pay on your student loan. According to the IRS, you may deduct up to $2,500 or the amount of interest you actually paid during the year, whichever is lesser. To claim this deduction, you must meet certain criteria, including having a Modified Adjusted Gross Income (MAGI) below a specified threshold.
Additionally, if you have children, you may be able to take advantage of education-related tax credits, such as the American Opportunity Tax Credit, which offers up to $2,500 in tax credits for expenses incurred during the first four years of education after high school. You may also be able to offset care costs through Child Tax Credits and Dependent Care Credits.
If you're a US self-employed individual with your own business, you may be able to utilize the Consolidated Appropriations Act through 2025. This act allows employers to provide up to $5,250 in student loan repayment assistance per employee on a pre-tax basis. By owning a sole proprietorship, LLC, or S-Corp, you can give yourself this benefit and potentially save on taxes, depending on your state's regulations.
Finally, consider consulting a tax professional or accountant to guide you through the specific tax codes and deductions applicable to your situation. They can help you navigate the complexities of tax laws and ensure you're taking advantage of all the deductions and credits available to you.
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Frequently asked questions
The amount you pay depends on your adjusted net income, which is your income minus any expenses. If you earn above the repayment threshold, you're required to pay 12 cents of every dollar you earn above that threshold. For the 2026 tax year (1 April 2025 to 31 March 2026), the annual repayment threshold is $24,128.
Student loan repayments are typically made at the end of the tax year when you file your income tax return. However, if your end-of-year loan repayment is more than $1,000, you’ll also need to make three 'interim repayments' during the following tax year.
If you don't make your payments on time, you may be charged late payment interest. Late payment interest is only charged on the overdue amount and only if the overdue amount is $334 or more.
If you go overseas, you may be charged interest depending on how long you go for. You need to contact Inland Revenue before you leave New Zealand and you may need to keep making student loan repayments unless you can get a temporary repayment suspension.
You can make payments through your myIR account, which offers various payment options, including direct debit, internet banking, and credit or debit card payments.
