Student Loan Repayments In NZ: Is There A Big Difference When Paying Overseas?

Date Mar 5, 2021
Blog category Broadband
By Sieg C
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Access to free quality primary and secondary education is a basic right for all Kiwis. You don’t have to worry about the high school fees and expenses. But if you want to further your studies at a university, wānanga, or vocational school, then you might need to apply for a student loan.

While the NZ government offers one-year free university education, you still need to finance your accommodation, tuition, miscellaneous, among many other costs to finish a degree. Luckily, student loans can give you the financial means to pay for these fees in the meantime.

After you’ve graduated, how can you pay for your loan? What are the repayment options available for you? Your best option depends on your employment situation and income, so it varies greatly per person.

Check out this handy guide to your student loan repayment options in New Zealand.

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What determines the amount of your repayments?

Of course, you don’t want to spend all your paycheck just to pay for your loan. There's rent, utilities, and groceries, on top of everything else. The manager of your student loan balance and repayments — Inland Revenue (IRD) — understands this, so they set a minimum requirement before you can pay your loans.

You’re only required to start repaying your loan once you make at least $385 weekly, $770 fortnightly, $1,668.33 monthly, or $20,020 annually before tax. You’re charged 12% of every dollar you make above this amount. If you can contribute more than 12%, you’re free to do so as long as you live and work locally. Simply enquire with IRD to negotiate higher repayments.

How about if you’re earning less than $20,020 a year?

If you’re earning way less than this threshold, you don’t have to pay your student loans just yet. IRD sets this measure to ensure low-income earners aren’t forced to allocate their very little money to pay their loans.

What’s great is, student loans don’t incur interest! Even if you struggle to meet the minimum requirements to start paying off your loans, it won’t increase astronomically over time. This levels your opportunity to still pay your debts regardless of your financial footing.

What fees do I need to be wary of?

There are not a lot of fees to be wary of, as long as you get your repayments on time. If you miss out, you'll need to pay a ‘late payment interest fee’ for accumulated unpaid repayments of at least $334. 

This fee is calculated based on the loan interest rate of the tax year, with an additional 4% for the monthly rate! Luckily, you can skip these payments as long as you set up automatic repayments with your employer.

Can you pay your student loans automatically?

As long as you use the right tax code, your employer can deduct your student loan repayments directly from your paycheck. When you start a new job, simply include ‘SL’ in your tax code on your IRD form. 

If you fail to complete the necessary forms, you'll need to pay your student loan repayment yourself. Similarly, if you’re self-employed or earn income from other income streams like trust, dividends, salary, or remittances, you need to calculate your income and pay your repayments yourself as you have no employer to deduct it for you.

Is student loan repayments consolidation possible?

As student loans don’t incur interest, some New Zealanders actually hold off their repayments first. Instead of paying directly, they invest their money somewhere else and let it mature for a certain period.

Once the money has grown, they’ll withdraw their money as a lump sum and consolidate their student loan repayments. This is actually a smart financial choice as you can easily clear out your debts faster. Even if a student loan doesn’t earn interest, it’s better if you don’t have to worry about paying it from paycheck to paycheck, right?

Can you continue repaying outside New Zealand?

If you leave New Zealand, you can continue paying your repayments! However, working abroad for around 5-6 months means you may not be eligible for the same interest-free student loan repayments. You can nominate a person or an organisation to manage your loan and repayments. But ultimately, they can’t use your myIR account to pay without interest.

Although, there are some instances where you may still be eligible for interest-free repayments. For example, if you live or study within the New Zealand realm countries including Cook Islands, Tokelau, or Nieu, you can backtrack your repayments as delayed.

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What exempts you from paying your student loan with interest?

Just because you live overseas, doesn't mean you need to pay your student loan with interest. Aside from studying and living within the realm of New Zealand, here are some situations where you can take advantage of student loans interest-free.

  • Unexpected delayed return to New Zealand
  • Volunteering overseas 
  • Working for the government overseas
  • Studying overseas through government scholarship
  • Accompanying a partner doing volunteer work overseas 

You may be able to appeal your situation to IRD. Contact them directly to know if you qualify for interest-free student loan repayments while overseas.

How much does your repayment cost when overseas?

It depends on your student loan balance when you left New Zealand. If you leave the country before April 9, your repayment calculations start on April 9 too. Your repayment is charged every six months. If you pay $1,500 on April 9, you have to pay the same amount again on October 9.

To know the amount of your repayment, check this list.

Loan amount Repayment amount
$1,000 and below Half of your loan balance
$1,001 - $15,000 $500
$15,001 - $30,000 $1,000
$30,001 - $45,000 $1,500
$45,001 - $60,000 $2,000
$60,001 and over $2,500

This on top of the 3.50% per year interest fee. Late fees also apply. If you’re employed in a low-paying job abroad, you may have to squeeze in your budget to meet the required repayments and avoid late fees.

Do my student loan repayments become interest-free when I return to NZ?

Yes! Your student loan repayments can be interest-free when you return to NZ. You have to meet certain conditions before you’re fully eligible to get this repayment term.

  • You must remain within New Zealand for at least 152 full days within the first 183 days after your return.
  • If you go out of New Zealand for at least 32 days within 183  days of your return, you’re considered overseas-based and not eligible for interest-free repayments.

Once you meet this requirement, IRD will rewrite off any loan interest fees after the day you returned. To know if your terms meet this qualification, consult IRD.

What happens if you’ve finally completed your student loan repayments?

When you’re about to fully pay off your student loan, IRD will let you and your employer know. Usually, you’ll get notified when your balance is less than $1,000. This is to ensure that your deductions will stop at the right pay period.

When you’re overseas, you have to pay within 30 days after getting your billing statement for IRD to stop your student loan repayments and any interest fees. You may be able to pay your last repayments if you return to New Zealand and stay for at least 152 full days.

Once you’re done with your repayments, expect it to reflect on your myIR account. If you have overpayments, any amount will be paid to your bank account.

Does the government offer financial support?

Yes, the government offers financial support for your tertiary education. You can apply for student allowance as well as government-funded scholarship grants. To know more about your choices, visit the Ministry of Education’s for further education.

Nonetheless, there are plenty of non-government organisations that offer scholarship grants. If you experience financial difficulties, they may help you with furthering your education. Simply reach out to them through their different channels. Make sure you’re always connected to reliable broadband to respond to them immediately.

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