Student Loan
New Zealand student loans are provided by StudyLink to fund tertiary education, covering tuition fees, course-related costs, and living expenses. For borrowers living in New Zealand, loans are completely interest-free — you only repay what you borrowed.
Repayments are automatically deducted via PAYE at 12% of every dollar earned above the annual repayment threshold of $24,128 (2026-27). For example, if you earn $50,000, your annual repayment would be 12% × ($50,000 − $24,128) = $3,104.64. Self-employed borrowers make repayments through their end-of-year tax return.
Borrowers living overseas are charged interest and must make direct repayments to IRD based on their loan balance, regardless of their income. You can make voluntary repayments at any time to pay off your loan faster — there is no penalty for early repayment.
How it works
Student loans are administered by StudyLink and can cover tuition fees, course-related costs, and living costs while you study. As long as you remain based in New Zealand, the loan stays completely interest-free — the only thing you ever repay is the amount you originally borrowed, with no interest added over time.
Repayments are deducted automatically through PAYE once your income rises above the annual threshold, using the 'SL' suffix on your tax code (for example, M SL) to tell your employer to apply the extra deduction. Because the threshold and 12% rate are applied through the payroll system, most borrowers repay gradually throughout the year rather than facing one lump-sum bill.
If you're self-employed, your student loan repayment is calculated as part of your annual IR3 return rather than through an employer. You can also make voluntary extra repayments at any time — directly to IRD — to clear your loan faster, and there's no penalty for doing so, unlike some other types of debt.
Example: repayment on a $40,000 salary
At a $40,000 salary for 2026-27, only the amount above the $24,128 threshold is subject to repayment: $40,000 − $24,128 = $15,872.
Applying the 12% repayment rate gives 12% × $15,872 = $1,904.64 in student loan repayments for the year, deducted gradually from each pay through PAYE.
Frequently asked questions
Do I pay interest on my student loan while I live in New Zealand?
No — student loans are interest-free for borrowers who remain based in New Zealand; you only ever repay the principal amount you originally borrowed.
What changes if I move overseas with an unpaid student loan?
Overseas-based borrowers lose the interest-free benefit and are charged interest on their balance, and they must make direct repayments to IRD based on the loan balance rather than through a New Zealand payroll.
Can I pay off my student loan faster than the automatic deductions?
Yes — you can make voluntary extra repayments directly to IRD at any time, on top of what's deducted through PAYE, with no early-repayment penalty.
Related Terms
PAYE
PAYE (Pay As You Earn) is the system that New Zealand employers use to deduct income tax from employees' wages and salaries.
IRD
Inland Revenue Department (IRD), commonly known as Inland Revenue or simply IRD, is the New Zealand government agency responsible for collecting taxes, distributing social support payments, and enforcing tax compliance.
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