Student loan repayments in New Zealand are collected through the same PAYE system as income tax — your employer deducts them automatically, provided you have added SL to your tax code. Understanding repayment rates, the income threshold, and what happens if you go overseas is essential for managing your student loan efficiently.
Student loan repayments are deducted at 12 cents per dollar of income above $22,828/year ($439/week). Add "SL" to your tax code (e.g., M SL) so your employer deducts repayments automatically. Interest-free while you are NZ-based. If you leave NZ for more than 6 months, interest applies at around 3.5% per year. Repayments are also collected through your IR3 if you have non-PAYE income.
How Student Loan Repayments Work
NZ student loans are interest-free for NZ-based borrowers. Repayments are collected through:
- PAYE — deducted from wages by your employer
- IR3 — through your annual tax return if you have self-employment, rental, or other income
Your student loan balance does not appear on your payslip as a separate debt — it is managed through IRD, and repayments are simply deducted before you receive your net pay.
Repayment Threshold and Rate (2025–26)
| Amount | |
|---|---|
| Annual repayment threshold | $22,828 |
| Weekly equivalent | $439/week |
| Repayment rate | 12 cents per dollar above the threshold |
Example: You earn $50,000/year.
- Income above threshold: $50,000 − $22,828 = $27,172
- Annual repayment: $27,172 × 12% = $3,261
- Weekly repayment: approximately $62.71/week
Your Tax Code and Student Loan
To have your employer deduct student loan repayments, you must add SL to your tax code on your IR330:
| Situation | Tax code |
|---|---|
| Main job, no IETC, with student loan | M SL |
| Main job, IETC eligible, with student loan | ME SL |
| Second job, $48,001–$70,000 combined, with loan | SH SL |
If you forget to add SL, your employer will not deduct repayments. You will have a student loan repayment obligation at year end via your income tax assessment — and may be in under-repayment if this continues.
Interest on Student Loans
NZ-based borrowers: No interest charges while you live and work in New Zealand.
Overseas-based borrowers: Interest applies at approximately 3.5% per year (compound). You are considered overseas-based if you are outside NZ for more than 6 months in a 12-month period.
Going overseas? The interest charges can be significant on a large loan balance. IRD requires overseas-based borrowers to make overseas-based repayments — a compulsory amount based on your loan balance, regardless of what you earn.
Overseas-Based Repayments
If you move overseas, IRD expects repayments even if you have no NZ income. The compulsory annual repayment is based on your loan balance:
| Loan balance | Annual repayment required |
|---|---|
| $0–$15,000 | $1,000 |
| $15,001–$30,000 | $2,000 |
| $30,001+ | $3,000 |
Failing to make overseas repayments results in interest, penalties, and IRD can take legal action. Always notify IRD before leaving NZ for an extended period.
Repayment Holiday
You can apply for a repayment holiday — a period where your employer stops deducting student loan repayments. This is available if:
- You are experiencing serious hardship
- You are on a low income and repayments are causing genuine financial difficulty
A repayment holiday does not reduce your loan balance — it just pauses automatic repayments. Interest does not apply to NZ-based borrowers during a holiday (no interest anyway), but the loan balance does not decrease either.
Apply through myIR or by contacting IRD.
Repayments Through IR3
If you earn income other than PAYE (rental, self-employment), IRD assesses an additional student loan repayment obligation through your IR3. This is calculated at 12 cents per dollar of non-PAYE income above the threshold (combined with your PAYE income already considered).
Self-employed people may also need to pay student loan through provisional tax instalments if their combined annual repayment obligation is significant.
Frequently Asked Questions
How long will it take to repay my student loan?
It depends on your balance, income, and whether you make voluntary extra repayments. At $50,000 income, repayments of ~$3,261/year mean a $40,000 loan takes approximately 12 years at standard repayments (no voluntary extras, no interest as NZ-based). Voluntary extra payments can dramatically accelerate this.
Can I make extra repayments?
Yes — you can make voluntary repayments at any time through myIR via bank transfer. Extra repayments reduce your balance and shorten the repayment period.
I got a new job after not working. Do I need to update my tax code?
Yes. Give your new employer an IR330 with your current tax code including SL. If you have been out of the workforce, your loan balance may have grown from administration fees — check myIR for your current balance.
Does my student loan balance affect my credit rating?
Student loans are not reported to credit bureaus in the same way as commercial debt. However, IRD can take enforcement action (garnishment, charging orders) for significant overdue repayments, which may have knock-on credit impacts.