Student Allowance and Student Loan NZ - What You Actually Get
🎓 Student Allowance and Student Loan: What You Actually Get
Starting tertiary study in NZ means navigating StudyLink, a system that confuses even the most organised students. This guide breaks down the two main types of student support (allowance and loan), explains the parental income test, walks through the application process, covers the living costs loan, course-related costs, and explains exactly how repayment works after graduation, including the interest-free conditions and overseas repayment obligations.
Looking for the calculator?
If you came here to work out a number rather than read, use these instead:
- Student Allowance Calculator: estimate your weekly allowance.
- StudyLink Eligibility Calculator: check whether you qualify before you apply.
The guide below explains what sits behind those figures: the parental income test, allowance against living costs, and what you repay afterwards.
Student Allowance vs Student Loan: The Key Difference
| Feature | Student Allowance | Student Loan |
|---|---|---|
| What is it? | Weekly grant (non-repayable) | Loan (must be repaid) |
| Income tested? | Yes (your income AND parents' income if under 24) | No income test for fees/course costs; living costs capped |
| Maximum weekly rate | ~$305/week (single, away from home, 2026) | Living costs: ~$305/week; fees: full amount; course costs: up to $1,000/year |
| Repayable? | No | Yes, at 12% of income over threshold |
| Interest | N/A | 0% while living in NZ; interest charged if overseas |
The Parental Income Test (Under 24)
If you're under 24, StudyLink assesses your parents' combined income to determine your Student Allowance eligibility. This catches many students off guard. The thresholds (approximate, as at 2026):
- Single student, 1 parent: Allowance reduces from ~$100,000 parental income. Fully cut off around $120,000 to $130,000.
- Single student, 2 parents: Reduces from ~$106,000 combined. Cut off around $130,000 to $145,000 depending on family size.
- Each dependent sibling in the family raises the threshold (more kids = higher cut-off).
Exemptions from the parental income test:
- You're 24 or older
- You have a child of your own who depends on you
- You've been in the workforce or on a benefit for at least 2 years since leaving school
- You're married, in a civil union, or de facto with a partner
- Your parents can't be contacted or you're estranged (requires evidence)
Applying via StudyLink
Apply at studylink.govt.nz or through the MyStudyLink app. You'll need:
- RealMe login (set one up early, verification takes days)
- Your IRD number
- NZ bank account details
- Enrolment confirmation from your institution
- Parents' income details (if under 24)
- Your own income details (part-time work)
Apply at least 3 weeks before semester starts. Late applications are common and cause payment delays. First payments often arrive 2 to 3 weeks after approval.
📚 The Three Parts of a Student Loan
1. Compulsory Fees (Tuition)
Your student loan can cover the full cost of tuition fees. This is paid directly to your institution, not to you. There's no cap on the amount (it's whatever your course costs), but Fees Free covers the first year for most domestic students, so many students don't borrow for fees in year one.
Fees Free (first year): If you haven't previously studied, your first year of tertiary is likely covered by the government's Fees Free policy (up to one EFTS, equivalent to one year full-time). This is NOT a loan; it's a grant. After year one, you'll need to borrow for fees or pay out of pocket.
2. Living Costs
A weekly payment to help cover rent, food, and daily expenses. As at 2026, approximately $305/week for a full-time student. This IS a loan, you WILL repay it.
Critical: the living costs loan is the part that catches graduates. Three years of borrowing $305/week for 40 weeks/year = approximately $36,600. Add that to tuition fees of (say) $7,000/year x 3 = $21,000, and your total loan at graduation is roughly $57,600. Many students don't realise how much they're borrowing because it arrives weekly in small amounts.
3. Course-Related Costs
Up to $1,000 per year for textbooks, equipment, stationery, and other study costs. Paid to you as a lump sum each semester. Also a loan (repayable). Most students use this for textbooks and a laptop in year one, then don't claim it in later years.
Student Allowance: The Non-Repayable Option
If you qualify for Student Allowance (based on parental income test), you receive up to ~$305/week that you DON'T have to repay. This replaces the living costs component of the loan. You can still borrow for fees and course costs on top.
If your allowance is less than the living costs maximum (because your parents' income partially reduces it), you can "top up" with a living costs loan for the difference.
Accommodation Benefit
On top of either allowance or living costs, you may qualify for Accommodation Benefit (separate from Accommodation Supplement). This is a non-repayable top-up of up to $60/week for students with high accommodation costs relative to income. Check with StudyLink.
Your Own Income While Studying
Student Allowance abates (reduces) if you earn over a certain amount from part-time work (approximately $253/week before tax, as at 2026). Earn more than this and your allowance drops dollar-for-dollar. Student Loan living costs are NOT income-tested, so working doesn't affect your loan.
Tax codes for students: use M on your part-time job if it's your main income, add "SL" if you have a student loan (e.g. "M SL"). This triggers automatic 12% repayments once you're over the repayment threshold.
💰 Repayment After Graduation
The 12% Repayment Rule
Once you're earning above the repayment threshold (approximately $24,128/year from salary/wages, as at 2026), you repay 12 cents of every dollar OVER that threshold. This is automatically deducted from your pay if you're using the correct tax code (M SL, S SL, etc.).
Interest-Free Conditions
Your student loan is interest-free as long as you're a NZ-based borrower (living in NZ). The moment you go overseas for more than 184 consecutive days, interest starts accruing. As at 2026, the overseas interest rate is approximately 3.1% per annum.
This is one of the most generous student loan regimes in the world. The effective cost of borrowing is zero if you stay in NZ. However, many graduates head overseas for their OE (overseas experience) and are shocked when interest accumulates.
Overseas Repayment Obligations
If you leave NZ for more than 184 days:
- Interest starts from day 1 abroad (approximately 3.1%)
- You must make compulsory repayments based on your loan balance (not income)
- Repayment amounts: roughly $1,000 to $4,000/year depending on balance
- Penalties for non-payment: 1.5% monthly penalty on top of interest
- IRD can pursue you for unpaid amounts, including through overseas collection agencies
- Returning to NZ for 183+ consecutive days pauses the interest again
Voluntary Repayments
You can make extra repayments anytime. The faster you pay, the sooner you're debt-free. There used to be a 10% bonus on voluntary repayments, but this was abolished in 2012. Still, paying off faster means you carry less risk if you go overseas.
How Long Does Repayment Take?
Should You Prioritise Student Loan Repayment?
Because NZ student loans are interest-free while you live in NZ, there's a genuine debate about whether extra repayments are smart. Arguments both ways:
- For extra repayments: Eliminates the debt, reduces risk if you go overseas, psychological benefit of being debt-free
- Against extra repayments: Money invested elsewhere (KiwiSaver, savings, shares) earns returns, while the loan costs 0%. Mathematically, investing beats repaying a 0% loan.
The correct answer depends on your plans. If you might go overseas, pay it off first. If you're staying in NZ long-term, the interest-free loan is essentially free money and your extra cash is better deployed elsewhere.
🔢 Worked Examples and Real-World Stories
Example 1: Allowance vs Loan Comparison
Two students at the same university, same course, same 3 years:
The parental income test is the single biggest determinant of post-graduation financial position. It's worth understanding and claiming every dollar of allowance you're entitled to.
Example 2: The OE Interest Shock
Graduated with $52,000 student loan. Went to London for a 2-year OE. Didn't make overseas repayments.
What Happened:
- Interest at 3.1%: approximately $1,612/year compounding
- Penalty for non-payment (1.5%/month on overdue amounts): added ~$2,400 over 2 years
- Loan balance on return to NZ: approximately $58,000 (was $52,000)
- Extra $6,000 for nothing, because he didn't set up overseas repayments
Lesson: If you go overseas, set up overseas repayments before you leave. IRD sends the schedule. Missing payments triggers compound penalties that grow fast.
Real-World Story: The Part-Time Work Abatement Trap
Receives Student Allowance of $305/week. Works part-time at a cafe earning $280/week (under the ~$253 threshold after tax adjustments).
What Happened:
- During semester break, she picked up extra shifts: earned $420/week for 4 weeks
- Income over the abatement threshold triggered allowance reduction
- StudyLink sent an overpayment notice of $680 for those 4 weeks
- Had to repay $680 from savings
Lesson: Student Allowance reduces dollar-for-dollar above the income threshold. If you're going to work extra hours, calculate whether the extra income minus the lost allowance is actually worth it. Sometimes working more costs you money.
Real-World Story: The Fees Free Misunderstanding
Started a 4-year engineering degree. Assumed Fees Free covered all 4 years.
What Happened:
- Year 1 fees ($7,200): covered by Fees Free. No loan needed.
- Year 2 fees ($7,200): Jayden assumed it was still free. Didn't apply for a student loan.
- Got a fees invoice from the university in March. Had 4 weeks to pay.
- Scrambled to apply for a student loan. Took 3 weeks to process. Nearly had enrolment cancelled.
Lesson: Fees Free covers approximately 1 year (one EFTS). After that, you need to borrow or pay. Apply for a student loan for fees in year 2 BEFORE semester starts, not after the invoice arrives.
Real-World Story: The Smart Non-Repayer
Graduated with $45,000 loan. Earns $72,000. Considered making voluntary extra repayments.
What She Did Instead:
Lesson: For NZ-based borrowers, the 0% interest means your money works harder elsewhere. The mathematically optimal move is to let the compulsory 12% handle the loan and invest extra cash. Exception: if you're planning to go overseas, pay it off first.
🎯 Test Your Knowledge
Quiz on Student Allowance and Student Loans
Related guides
- Disability Allowance Explained, a related guide in the same area.
- Student Loan Repayment Guide, a related guide in the same area.