Paying it back

Once you earn over a certain amount a year (the 'repayment threshold' currently set at $18,148 before tax), you must start making repayments, even if you're still studying.

Your employer will deduct minimum repayments from your pay and send them to Inland Revenue. You need to tell your employer if you have a loan – especially if you earn more than the repayment threshold. It's important that you use the correct tax code otherwise you may find you have a bill at the end of the year.

Minimum repayments are calculated as 10 cents for every dollar you earn per year over $18,148.

Can I pay back more than the minimum amount?

Yes. You can pay back more than the minimum at any time.

Should I pay back more than the minimum amount?

Usually we suggest that people pay off debt as fast as they can, given that the longer they hold the loan, and the bigger it is, the more interest they pay. Student loans are different because if you're living in NZ, you won't be paying interest.

However:

• Some borrowers will feel better if they get rid of their debt and don't have it hanging over them, even if it is more sensible financially to minimise loan repayments.
• If you go overseas for 184 or more consecutive days (about 6 months) you will pay 6.7% interest (so your loan will increase).
• It's possible that your student loan may affect your ability to borrow in the future. Different lenders may have different views on student loan debt.

Should I pay back only the minimum amount?

You are not getting further into debt by paying only the minimum. Because of the effect of inflation your loan is dropping in value over time, e.g. if you have a student loan of $10,000 in 2008, and inflation is at a rate of 2%, your loan will be worth 2% less next year ($9,800).

Can I get out of repaying it?

The loan is a contract between you and the government, where you agree to pay it back. There is no getting out of this, and it will not be written off if you go overseas. Only your death or bankruptcy writes off the loan, so it pays to take it seriously.

If you are under 18, you need your parent's consent to take out the loan. It doesn't mean they're guaranteeing your loan though. You’re still fully responsible for paying it back.