Student Loan Repayment

Interest, and where it starts

While you live in New Zealand, your student loan is interest-free. This is the feature that shapes every sensible decision about it: the balance does not grow, so its real cost falls slowly over time.

Move overseas long enough to become an overseas-based borrower and interest applies. The current rate is 5.6% a year for the 2027 tax year, calculated daily and added to the loan after 31 March each year. Overseas-based borrowers also have their own repayment obligations, set by Inland Revenue rather than deducted through a New Zealand payroll.

That is why returning New Zealanders sometimes find a loan they thought they had been ignoring has grown while they were away.

A worked example

An example, using the same person as our other tax entries.

Someone on $68,000 a year, paid fortnightly, with a student loan.

Gross fortnightly pay is about $2,615.38. The fortnightly threshold is $928. The amount above it is $1,687.38, and 12% of that is about $202 a fortnight, or roughly $5,265 across the year.

That $202 sits alongside about $531 of PAYE and ACC levy and about $92 of KiwiSaver at the default 3.5% rate. Add it all up and roughly $825 of a $2,615 fortnightly gross never reaches the account.

None of that is a mistake. It is simply why "I earn $68,000" and "I have $1,790 to run my life on this fortnight" are both true statements.

What people commonly get wrong

"My repayment is based on my annual income." For salary and wage earners it is calculated per pay period. A fortnight with overtime or a bonus is assessed on that fortnight's earnings, which is why a big pay can produce a repayment larger than a straight annual calculation suggests.

"It's a tax, so I'll get it back." It is a loan repayment. It reduces the balance you owe rather than being assessed and refunded at year end.

"I should pay it off before anything else." It charges no interest while you are in New Zealand. Anything that does charge interest costs you more to leave outstanding, in pure arithmetic terms. Whether you would rather be rid of the loan anyway is a personal call, and this is general information rather than advice about your debts.

"Overseas is fine, they'll never find me." Interest accrues from the day you become an overseas-based borrower, whether or not you engage with it. The balance you come home to is the one that has been compounding.

"A second job means I don't have to worry about it." Every job with an SL code deducts against that job's pay-period threshold, which is one of the more common causes of unexpected end-of-year adjustments.

Where it meets your weekly budget

A student loan repayment is one of the few large deductions that is completely invisible in your own bank account, because it never arrives there. That makes it easy to plan around, which is unusual for debt.

What it does mean is that your gross salary is an even worse guide to your budget than usual. If you are working out what you can afford in rent, use what actually lands, then subtract what is already committed before payday: rent, power, insurance, instalments, savings contributions.

That remainder is what you are really deciding with. It is what Safe to Spend shows, and the free calculator at /safe-to-spend#calculator will run it on your own numbers.