Around 730,000 New Zealanders currently have a student loan, with the average balance sitting around NZ$23,000. If you are among them, understanding how repayments work is crucial for managing your finances and planning ahead. The student loan system in New Zealand is relatively straightforward for NZ-based borrowers – repayments are automatically deducted from your salary and the loan is interest-free while you remain in the country. But for those heading overseas, the rules change dramatically. In this guide, we cover everything you need to know about student loan repayments in 2026.
How Repayments Work for NZ-Based Borrowers
If you live and work in New Zealand, student loan repayments are deducted from your pay automatically through the PAYE system. The key parameters for 2026 are:
- Repayment threshold: NZ$22,828 per year (approximately NZ$439 per week)
- Repayment rate: 12% of every dollar earned above the threshold
- Interest rate: 0% for NZ-based borrowers
This means if you earn NZ$60,000 per year, you repay 12% of (NZ$60,000 − NZ$22,828) = 12% of NZ$37,172 = NZ$4,461 per year, or approximately NZ$86 per week. This is deducted from your pay alongside PAYE and KiwiSaver.
The zero-interest feature is significant. Unlike many other countries (the UK charges up to 7.3% interest, Australia charges indexation), a New Zealand student loan does not grow while you are making repayments in NZ. Every dollar you repay reduces your balance by exactly one dollar. This makes the NZ student loan system one of the most favourable in the world for graduates.
Our student loan calculator shows exactly how much is deducted from your pay and how long it will take to pay off your loan at your current income.
The M Tax Code
When you start a new job, you fill in a tax code declaration (IR330). If you have a student loan and this is your primary employment, your tax code will be M SL (where M is the standard primary income code and SL indicates a student loan). Your employer uses this code to deduct student loan repayments alongside your PAYE tax.
If you have a secondary job, the tax code will include SL as well (e.g., S SL, SH SL). Student loan repayments are calculated on the combined income from all jobs, but the threshold is only applied once across all employment. If your secondary job deducts more student loan repayments than necessary, you will receive a refund in your end-of-year tax assessment.
Overseas Borrowers: A Very Different Story
The most important thing any borrower needs to know is that the interest-free status does not apply when you are overseas. If you leave New Zealand for more than 184 consecutive days, your student loan starts accruing interest. The current overseas interest rate is approximately 4% per year, compounding annually.
On a NZ$30,000 loan, that is NZ$1,200 per year in interest alone. If you do not make adequate repayments, your loan balance can grow significantly while you are overseas. There are many stories of Kiwis who went on their OE (overseas experience) for five years and came home to find their loan had grown by NZ$10,000 or more in accumulated interest.
Overseas borrowers are required to make repayments to IRD based on their loan balance:
- Loan balance NZ$1,000–NZ$15,000: NZ$1,000 per year
- Loan balance NZ$15,001–NZ$30,000: NZ$2,000 per year
- Loan balance NZ$30,001–NZ$45,000: NZ$3,000 per year
- Loan balance NZ$45,001–NZ$60,000: NZ$4,000 per year
- Loan balance above NZ$60,000: NZ$5,000 per year
These minimum repayments may not even cover the interest accruing, particularly for larger loans. If you are overseas and not meeting your repayment obligations, IRD will add late payment interest and penalties on top of the standard overseas interest rate.
Strategies to Pay Off Your Loan Faster
Since the loan is interest-free in New Zealand, mathematically there is no urgency to pay it off early. Any extra money you put towards the loan instead of investing could earn returns elsewhere. However, there are psychological and practical reasons some people prefer to clear it:
- Planning to go overseas: If you are thinking about travelling or moving abroad, paying off your loan before you leave avoids the overseas interest charges entirely
- Mortgage applications: While having a student loan does not prevent you from getting a mortgage, lenders include your student loan repayments in their assessment of your outgoings, which can reduce your borrowing capacity
- Peace of mind: Some people simply prefer to be debt-free, even if the mathematical return is neutral
You can make voluntary repayments at any time through myIR. There is no penalty for paying early, and every voluntary payment goes straight to reducing your balance.
Student Loan and Your Take-Home Pay
The student loan deduction is one of the less understood aspects of many Kiwis' payslips. It sits alongside PAYE, KiwiSaver, and ACC, reducing your take-home pay by what can feel like a significant amount. On a NZ$55,000 salary, the student loan deduction is approximately NZ$3,861 per year (NZ$74 per week), which combined with tax and KiwiSaver leaves noticeably less in your pocket compared to someone without a loan.
Understanding exactly how the student loan affects your weekly pay helps you budget and plan effectively. Use our student loan calculator to see the impact, and our salary calculator for the full breakdown of all deductions from your pay. If you are comparing job offers, our salary comparison tool includes student loan deductions so you can compare like for like.