Student Loan Repayment NZ: How It Works
Contents (11 sections)
If you have a student loan and earn more than $22,828 per year, you repay 12% of every dollar above that threshold. On a $60,000 salary, that's $4,461 per year or $86 per week, deducted automatically from your pay alongside PAYE. For borrowers based in New Zealand, the loan is interest-free (IRD).
Use the Forge Money PAYE calculator to see your exact take-home pay after student loan repayments, PAYE, ACC, and KiwiSaver.
How student loan repayments work
Student loan repayments in NZ are collected through the PAYE system. Your employer deducts repayments from each pay, just like income tax. You don't need to make separate payments or set up direct debits. The money goes straight to IRD, who apply it to your loan balance (IRD).
The repayment rate is 12% on income above the repayment threshold of $22,828 per year (for the 2025-26 tax year). Income below that threshold is not subject to repayment. Only the amount above $22,828 counts (IRD).
On your payslip, student loan repayments appear as a separate line item, distinct from PAYE and ACC. Some payroll systems label it "SL" or "Student Loan." If you're not sure whether it's being deducted, check your payslip or log in to myIR to view your deduction history.
To have repayments deducted correctly, you need to use a student loan tax code. For most people with one job, that's M SL (primary employment with student loan). If you have a second job, use S SL, SH SL, or ST SL depending on your income level. See the NZ income tax guide for a full tax code table.
How much you repay at different income levels
All figures are annual and weekly repayment amounts for the 2025-26 tax year. The repayment threshold is $22,828 (IRD).
| Annual income | Income above threshold | Annual repayment | Weekly repayment |
|---|---|---|---|
| $22,828 or less | $0 | $0 | $0 |
| $40,000 | $17,172 | $2,061 | $40 |
| $50,000 | $27,172 | $3,261 | $63 |
| $60,000 | $37,172 | $4,461 | $86 |
| $75,000 | $52,172 | $6,261 | $120 |
| $85,000 | $62,172 | $7,461 | $143 |
| $100,000 | $77,172 | $9,261 | $178 |
| $120,000 | $97,172 | $11,661 | $224 |
The calculation is straightforward: subtract $22,828 from your annual income, then multiply by 12%. If you earn less than $22,828, you don't make compulsory repayments (though you can still make voluntary ones).
How long to repay your loan
The time it takes to clear your student loan depends on your income level and loan balance. For NZ-based borrowers with a 0% interest rate, every dollar of repayment reduces the balance directly (IRD).
Estimated time to repay a $30,000 loan
| Annual income | Annual repayment | Approximate time to repay |
|---|---|---|
| $40,000 | $2,061 | 14.6 years |
| $50,000 | $3,261 | 9.2 years |
| $60,000 | $4,461 | 6.7 years |
| $75,000 | $6,261 | 4.8 years |
| $85,000 | $7,461 | 4.0 years |
| $100,000 | $9,261 | 3.2 years |
| $120,000 | $11,661 | 2.6 years |
These estimates assume a static income (no pay rises) and no voluntary extra repayments. In practice, salary increases over time will speed up repayment. The estimates also assume you remain NZ-based (0% interest). If you go overseas, interest charges will extend the repayment period.
If you want to clear your loan faster, voluntary repayments are the most effective option. See the section below.
Interest-free for NZ-based borrowers
Student loans are interest-free for borrowers who are based in New Zealand. "Based in NZ" means you're physically present in New Zealand for at least 183 days in any 12-month period (IRD).
This is one of the biggest financial advantages of staying in NZ after study. A $30,000 loan stays at $30,000 (minus repayments) regardless of how long it takes you to pay it off. There's no compounding interest eating into your repayments.
The 0% interest rate has been in place since 1 April 2006 for NZ-based borrowers (IRD).
Voluntary repayments
You can make extra repayments on top of your compulsory PAYE deductions at any time. Voluntary repayments go directly to reducing your loan balance. There's no penalty for overpaying, and no minimum amount for a voluntary payment (IRD).
To make a voluntary repayment, you can:
- Pay through myIR using internet banking
- Set up an automatic payment to IRD's student loan account
- Make a one-off payment at any Westpac branch
Voluntary repayments are worth considering if you have spare cash and want to clear your loan faster. Because the loan is interest-free for NZ-based borrowers, there's no mathematical urgency to pay it off early. However, eliminating the 12% repayment deduction from your pay increases your take-home income once the balance reaches zero.
For example, on an $85,000 salary, clearing your loan frees up $7,461 per year ($143 per week) in take-home pay. Whether that's worth prioritising over other goals (like KiwiSaver contributions or saving for a house) depends on your personal financial situation.
How to check your loan balance
You can check your current student loan balance through myIR at any time. Log in, navigate to the "Student loan" section, and you'll see your current balance, recent repayments, and repayment history (IRD).
Your balance is updated as repayments are received from your employer through PAYE. There can be a short delay between a deduction appearing on your payslip and it being applied to your loan balance in myIR. End-of-year repayments are reconciled after 31 March.
IRD also sends an annual student loan statement, typically between May and July, showing your opening balance, total repayments for the year, any interest or penalties, and your closing balance.
Overseas-based borrowers
If you leave New Zealand for more than 183 days in any 12-month period, you're classified as an overseas-based borrower. The rules change significantly (IRD).
Interest is charged
Overseas-based borrowers are charged interest on their student loan at a rate set annually by the government. The rate for 2025-26 is approximately 4% (IRD). This interest compounds, meaning it's added to your loan balance and you pay interest on the growing total.
A $30,000 loan at 4% interest grows by $1,200 in the first year alone. If repayments don't cover the interest, the balance increases rather than decreasing. This is the single biggest financial consequence of going overseas with a student loan.
Repayment obligations
Overseas-based borrowers have compulsory repayment obligations regardless of income. You must repay a minimum amount each year, calculated as a percentage of your loan balance. IRD will write to you setting out your required repayments before the due dates (IRD).
For the 2025-26 year, the repayment obligations are based on your loan balance:
- Loans under $1,000: full balance due
- Loans $1,000 to $15,000: $1,000 or loan balance (whichever is less)
- Loans $15,001 to $30,000: $2,000
- Loans $30,001 to $45,000: $3,000
- Loans $45,001 to $60,000: $4,000
- Loans over $60,000: $5,000
These are minimum amounts. The compulsory repayment may not cover the interest being added, meaning your loan balance can grow even while you're making the required payments (IRD).
Consequences of not paying
If you don't meet your overseas-based repayment obligations, IRD can (IRD):
- Charge late payment interest (an additional penalty rate on top of the standard interest)
- Apply penalties to your loan balance
- Issue an arrest order preventing you from leaving NZ if you return for a visit
- Pursue debt collection through agencies and international agreements
- Offset any tax refunds you're owed against your student loan
The arrest-at-the-border power is real. IRD has used it to stop borrowers leaving NZ until they set up a repayment arrangement. If you're planning to travel overseas with an outstanding loan, make sure your repayments are up to date or you have an arrangement in place (IRD).
Returning to New Zealand
When you return to NZ and become NZ-based again (183 days in 12 months), your interest rate drops back to 0%. Any interest that has already been charged stays on your balance, but no new interest accrues. Your repayments revert to the standard 12% of income above $22,828 through PAYE (IRD).
If your loan grew significantly while you were overseas, you'll be repaying the higher balance at 0% interest when you return.
Repayment exemptions and hardship
In some situations, you can apply for a reduction or exemption from student loan repayments (IRD).
Repayment holiday (overseas-based only): If you're going overseas temporarily and can demonstrate hardship, you may be able to apply for a temporary repayment exemption. This doesn't stop interest from accruing on your balance, but it can defer the compulsory repayment obligation.
Hardship provisions: If you're experiencing serious financial hardship, you can contact IRD to discuss your repayment situation. They may be able to set up an instalment arrangement or reduce the amount you're required to repay in a given period.
Small balance write-off: If your student loan balance is below a certain threshold (currently $20) and you have no further study planned, IRD will write off the remaining balance automatically (IRD).
There is no general "repayment holiday" for NZ-based borrowers. If you earn above the threshold, repayments are compulsory through PAYE.
Worked examples
Example 1: $55,000 salary with $25,000 student loan
Mia earns $55,000 and has a $25,000 student loan balance. She contributes 4% to KiwiSaver and is based in NZ (0% interest). (Examples use 4% KiwiSaver, the default rate from April 2028.)
| Deduction | Calculation | Annual | Weekly |
|---|---|---|---|
| PAYE | Progressive rates | $8,721 | $168 |
| ACC earner's levy | $55,000 x 1.67% | $919 | $18 |
| KiwiSaver (4%) | $55,000 x 4% | $2,200 | $42 |
| Student loan | ($55,000 - $22,828) x 12% | $3,861 | $74 |
| Total deductions | $15,701 | $302 | |
| Take-home pay | $39,299 | $756 |
PAYE breakdown (IRD):
| Bracket | Rate | Tax |
|---|---|---|
| $0 to $15,600 | 10.5% | $1,638 |
| $15,601 to $53,500 | 17.5% | $6,633 |
| $53,501 to $55,000 | 30% | $450 |
| Total | $8,721 |
Mia's tax code is M SL. Her student loan repayment adds $74 per week to her deductions compared to someone without a loan.
Time to repay: At $3,861 per year with 0% interest, Mia will clear her $25,000 loan in approximately 6.5 years, assuming her salary stays the same. In practice, salary increases will speed this up.
Without the student loan, Mia's take-home would be $43,160 per year ($830 per week). The loan costs her $74 per week in take-home pay until it's fully repaid.
Example 2: $85,000 salary with $40,000 student loan
Jake earns $85,000 and has a $40,000 student loan balance. He contributes 4% to KiwiSaver and is based in NZ (0% interest).
| Deduction | Calculation | Annual | Weekly |
|---|---|---|---|
| PAYE | Progressive rates | $17,928 | $345 |
| ACC earner's levy | $85,000 x 1.67% | $1,420 | $27 |
| KiwiSaver (4%) | $85,000 x 4% | $3,400 | $65 |
| Student loan | ($85,000 - $22,828) x 12% | $7,461 | $143 |
| Total deductions | $30,209 | $581 | |
| Take-home pay | $54,791 | $1,054 |
PAYE breakdown (IRD):
| Bracket | Rate | Tax |
|---|---|---|
| $0 to $15,600 | 10.5% | $1,638 |
| $15,601 to $53,500 | 17.5% | $6,633 |
| $53,501 to $78,100 | 30% | $7,380 |
| $78,101 to $85,000 | 33% | $2,277 |
| Total | $17,928 |
Jake's tax code is M SL. His total deductions are 34.5% of gross income, with the student loan representing about a quarter of all deductions.
Time to repay: At $7,461 per year with 0% interest, Jake will clear his $40,000 loan in approximately 5.4 years.
Without the student loan, Jake's take-home would be $62,252 per year ($1,197 per week). Once his loan is cleared, he'll gain an extra $143 per week in take-home pay.
The overseas comparison: If Jake moved overseas and was charged 4% interest on his $40,000 balance, he'd accumulate $1,600 in interest in the first year alone. If he only made the minimum overseas-based repayment ($3,000 for a $30,001-$45,000 loan), only $1,400 would actually reduce his balance after interest. At that rate, it would take decades to clear the loan. Staying in NZ and paying $7,461 per year at 0% interest clears it in 5.4 years.
Common questions
Is my student loan interest-free?
Yes, if you're based in New Zealand. "Based in NZ" means physically present for at least 183 days in any 12-month period. The 0% interest rate has been in place since April 2006. If you go overseas for more than 183 days, interest is charged at approximately 4% (IRD).
What happens if I go overseas?
If you leave NZ for more than 183 days in any 12-month period, you become an overseas-based borrower. Interest is charged on your loan (approximately 4% for 2025-26), and you have compulsory repayment obligations based on your loan balance regardless of your income. If you don't meet these obligations, IRD can charge penalties, pursue debt collection, and in some cases issue an arrest order to prevent you leaving NZ when you return (IRD).
Can I make extra repayments?
Yes. You can make voluntary repayments at any time through myIR or internet banking. There's no minimum amount and no penalty. Extra repayments go directly to reducing your loan balance. Because the loan is interest-free for NZ-based borrowers, the main benefit of early repayment is increasing your take-home pay once the loan reaches zero (IRD).
What is the repayment threshold?
The repayment threshold for the 2025-26 tax year is $22,828 per year. You only repay 12% on income above this amount. If you earn less than $22,828, no compulsory repayments are made. The threshold is adjusted periodically. It was $22,828 for the 2024-25 year as well (IRD).
Does my student loan affect my credit score?
No. Student loans through IRD do not appear on your credit report and don't affect your credit score. They're not a commercial loan and aren't reported to credit agencies. However, lenders (such as banks assessing a mortgage application) will typically ask about your student loan balance because the 12% repayment reduces your disposable income, which affects your borrowing capacity (IRD).
When is my loan balance updated?
Your balance in myIR is updated as repayments are received from your employer through PAYE. There can be a short delay between a payslip deduction and the balance update. A full reconciliation happens after the end of the tax year (31 March), and IRD sends an annual statement between May and July showing your opening balance, total repayments, and closing balance (IRD).
Can I get a student loan repayment holiday?
There is no repayment holiday for NZ-based borrowers. If you earn above the $22,828 threshold, repayments are compulsory through PAYE. If you're overseas and experiencing financial hardship, you may be able to apply for a temporary exemption from overseas-based repayment obligations. Contact IRD to discuss your options (IRD).
What tax code do I use with a student loan?
For your primary job, use M SL. For a secondary job, use the appropriate secondary code with SL added: S SL, SH SL, or ST SL depending on your total income level. The SL component tells your employer to deduct 12% of income above the weekly equivalent of the $22,828 threshold. Using the wrong tax code means repayments won't be deducted correctly and you may owe IRD at year end (IRD).
What happens when my loan is fully repaid?
IRD will notify you and your employer when your student loan balance reaches zero. You'll need to change your tax code (from M SL to M, or from S SL to S, etc.) to stop the 12% deduction from your pay. If overpayments were made in the final period, IRD will refund the excess. You can update your tax code through myIR or by giving your employer a new IR330 form (IRD).
Do student loan repayments reduce my taxable income?
No. Student loan repayments are not a tax deduction. They don't reduce your taxable income or your PAYE. They're a separate deduction that reduces your take-home pay but goes toward paying down your loan balance. Your PAYE is calculated on your full gross income regardless of your student loan (IRD).
What to do next
- PAYE calculator: Get your exact take-home pay including student loan, PAYE, ACC, and KiwiSaver
- NZ tax brackets: See all five brackets and what you pay at every income level
- NZ income tax guide: How PAYE, tax codes, RWT, PIR, and tax credits all work together
- KiwiSaver contribution rates: How your KiwiSaver rate affects take-home pay alongside your loan repayment
Last updated: 28 February 2026. Sources: IRD (ird.govt.nz), StudyLink (studylink.govt.nz). Figures are for the 2025-26 tax year (1 April 2025 to 31 March 2026). This is financial information, not financial advice.
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