Student Loan Repayment Guide
🎓 Understanding NZ Student Loans
New Zealand's student loan scheme helps pay for tertiary education with interest-free loans (if you stay in NZ). Repayments are automatic through your salary or wages, starting once you earn over the threshold. Understanding how repayments work helps you plan finances and pay off debt faster.
Student Loan Basics
What's Covered:
- Compulsory fees: Course fees charged by institution
- Course-related costs: Up to $1,000/year for books, equipment
- Living costs: Up to $250/week during study (loan becomes debt)
Interest-Free Conditions:
Repayment Threshold 2024/25
| Income Type | Threshold | Repayment Rate |
|---|---|---|
| Salary/Wages | $24,128/year ($464/week) | 12% of income over threshold |
| Self-Employment | $24,128/year | 12% of income over threshold |
| Overseas Income | NZD equivalent | 12% over threshold |
How Automatic Repayments Work
PAYE Deduction:
Employer automatically deducts student loan repayment with PAYE tax.
Annual Calculation:
Salary $55,000 per year:
Tax Code with Student Loan
Your tax code tells employer to deduct loan repayments:
| Without Loan | With Loan | Meaning |
|---|---|---|
| M | ME | Main income with student loan |
| SB | SB SL | Secondary income with student loan |
| S | S SL | Secondary lower with student loan |
Forgot to add SL to tax code: No loan repayments deducted during year, large bill at year-end
Example: $55K salary, forgot SL = Owe $3,705 in March
Always notify employer when starting job if you have student loan.
Self-Employed Repayments
Self-employed make loan repayments through tax system:
Example:
Overseas-Based Borrowers
Living overseas for 6+ months triggers different rules:
Key Changes:
- Interest charged: Currently 3.1% p.a. (rate varies)
- Minimum repayments: Based on loan balance, not income
- Annual obligation: Must make minimum payment even if not earning
- Repayment holiday: Can apply for 1 year if financial hardship
Overseas Repayment Obligations 2024/25:
| Loan Balance | Annual Minimum | Monthly |
|---|---|---|
| Under $30,000 | $2,496 | $208 |
| $30,000 - $45,000 | $3,744 | $312 |
| $45,000 - $60,000 | $4,992 | $416 |
| Over $60,000 | $6,240+ | $520+ |
Going overseas? Notify IRD in advance to avoid penalties. If earning well overseas, pay more than minimum to clear debt before interest compounds. Even at 3.1%, interest on $50K loan = $1,550/year.
Voluntary Repayments
Can pay extra to clear loan faster:
Why Pay Extra:
- Free up future cash flow (12% of income)
- Prepare for potential overseas move
- Psychological benefit of being debt-free
- Qualify for mortgages easier (debt affects borrowing)
How to Pay Extra:
Loan Balance Management
Check Your Balance:
Log into myIR account to see:
- Current loan balance
- Repayments made this year
- Estimated payoff date
- Interest charged (if overseas)
Typical Loan Progression:
| Year | Salary | Annual Repayment | Balance |
|---|---|---|---|
| Graduate (2020) | $48,000 | $2,865 | $45,000 |
| Year 2 (2021) | $55,000 | $3,705 | $41,295 |
| Year 5 (2024) | $75,000 | $6,105 | $23,500 |
| Year 8 (2027) | $90,000 | $7,905 | $0 (Paid off!) |
🔢 Repayment Calculations
Example 1: Graduate Entry Salary
First job out of university: $50,000
Annual Calculation:
Fortnightly Breakdown:
Example 2: Mid-Career Professional
5 years experience: $80,000 salary
Loan Payoff Timeline:
Example 3: Part-Time Work While Studying
Student working part-time: $15,000/year
Key point: Don't pay until earning over $24,128. Focus on studies first.
Example 4: Multiple Income Sources
Main job $45,000 + Side business $20,000
From Main Job (automatic PAYE):
From Side Business (year-end assessment):
Example 5: Voluntary Extra Repayments
Accelerating repayment to clear loan faster:
Standard Repayment:
With Extra $200/month:
Example 6: Going Overseas
Moving to Australia with $45,000 loan:
Before Leaving NZ:
After Moving to Australia:
Strategy:
🌍 Real-World Loan Scenarios
Teaching degree graduate with typical loan:
| Year | Position | Salary | Repayment | Balance |
|---|---|---|---|---|
| 2020 | Graduate | $51,000 | $3,225 | $48,000 |
| 2021 | Year 2 | $54,000 | $3,585 | $44,415 |
| 2023 | Year 4 | $62,000 | $4,545 | $32,000 |
| 2026 | Senior | $78,000 | $6,465 | $8,200 |
| 2027 | Senior | $80,000 | $6,705 | $0 ✓ |
Total time: 7 years to clear $48,000 loan. No interest paid (stayed in NZ).
Graduate considering UK working holiday with $38,000 loan:
Option A: Stay in NZ
Option B: 2 Years in UK
Smart Strategy:
Started new job, didn't tell employer about student loan:
Throughout Year:
Year-End Assessment:
Lesson: Always update tax code to ME when starting employment. Avoid year-end surprises.
Doctor with large loan but high income potential:
Loan After Med School:
House Officer Years (2 years):
Registrar Years (4 years):
Consultant (3 years to payoff):
Total time: 9 years to clear $120,000 loan. High income accelerates payoff despite large balance.
🎯 Test Your Knowledge
Quiz on Student Loan Repayments
Frequently Asked Questions
How much are student loan repayments in New Zealand?
For salary and wage earners, repayments are 12% of income above the annual repayment threshold, deducted automatically through PAYE using the SL tax code.
What is the student loan repayment threshold?
There is an annual income threshold below which you make no repayments; income above it is charged at 12%. The threshold is set each year by the government.
Is my student loan interest-free?
It is interest-free while you are based in New Zealand. If you move overseas for an extended period, interest is usually charged on the balance.
Can I pay my student loan off faster?
Yes. You can make voluntary extra repayments at any time, which reduces the balance and clears the loan sooner.
Related guides
- Student Allowance and Student Loan NZ, a related guide in the same area.
Situations like yours. The 4 situations worked through above sit alongside 8 more about studying, each with the sums shown.