Paying back your loan
How and when to start paying back your Student Loan if you're studying or working. How to pay back the full amount and knowing how much you've paid back.
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When to start paying back your Student Loan
If you earn more than the repayment threshold of $19,084 (about $367 per week) for the tax year 1 April to 31 March, you are required to start making repayments towards your loan even while you are studying.
If you’re in New Zealand and earn salary or wages or get a Student Allowance, you need to add “SL” to your tax code regardless of how much you earn, unless you have an exemption.
You can apply for a repayment deduction exemption if you're studying full-time and expect to earn less than the annual repayment threshold ($19,084 for the 2014 tax year). You can apply for this exemption through your Inland Revenue online services account.
If you’re earning above the pay period repayment threshold, your Student Loan deductions every pay period will be considered your repayment obligation, unless there is a significant over or under-deduction.
You can start paying back your loan while you're still studying, even if you're earning less than the repayment threshold.
Make sure you register for Inland Revenue's online services. It allows you to view details about your account, file returns, send mail and update details such as bank account, addresses and phone numbers straightaway. You can also request an up-to-date statement for your Student Loan account.
From 1 April 2014, the definition of income for Student Loan repayment purposes will be extended to better align with the Working for Families definition and the parental income test for Student Allowances.
Repayments on your Student Loan need to be made to Inland Revenue.
You can make repayments to Inland Revenue by;
- asking your employer to make additional deductions from your wages
- internet banking. Use the tax payment facility on your banks website
- credit or debit card through Inland Revenue’s website
- completing an Automatic Payment authority (IR 586) form
- cash or cheque at any branch of Westpac bank using a repayment slip
- sending Inland Revenue a cheque made out to them, and your details, to the address below.
PO Box 39050
Wellington Mail Centre
Lower Hutt 5045
Overdue repayment obligations
- If you have $500 or more in default at the time of your application, and at least some portion of that amount has been overdue with Inland Revenue for a year or more, you won’t be able to get a Student Loan. You can only apply for a Student Loan once you have reduced the default amount to under $500 (repayments should be made to Inland Revenue). Living costs can only be paid from the date we receive your application or the date you start study, whichever is later.
The Student Loan repayment rate is 12 cents in every dollar earned over the repayment threshold of $367 per week or $19,084 annually.
How to make repayments from your income
If you receive salary or wages, Student Allowance, or other income support, and earn more than the pay period repayment threshold, your employer or organisation paying you will make repayment deductions from your income on your behalf.
You need to select a tax code with an “SL” repayment code on your tax code declaration (IR 330) and return it to your employer. Twelve cents in every dollar you earn over the pay period repayment threshold will be deducted by your employer to repay your Student Loan.
The Inland Revenue website gives you more information on what tax code you should be using.
How to make repayments from your income if you're self-employed
If you’re self-employed or earning income from other sources, you won't automatically have repayment deductions made from your income.
Instead you may need to file an individual tax return (IR 3) or receive a personal tax summary at the end of the tax year. Inland Revenue will work out how much you need to repay towards your Student Loan. You have until 7 February of the next year (or 7 April if you have a tax agent) to pay this amount in full. Inland Revenue will work out whether you are required to make interim payments for the following year, along with the amount and when they are due to be paid.
You’ll need to contact Inland Revenue before you leave New Zealand. Generally, you’re not eligible for an interest-free Student Loan if you’re away for six months (184 days) or more. But you may qualify for a repayment holiday of up to 356 days. You’ll need to provide a willing alternative contact person based in New Zealand and apply for this before going overseas or before you become overseas based (184 or more days).
From 1 April 2014:
Inland Revenue will be able to request an arrest warrant for borrowers who knowingly defaulted on their overseas-based repayment obligation and are about to leave New Zealand.
There will also be changes to the overseas-based borrower repayment rules:
- Fixed repayment obligations from when borrowers leave New Zealand.
- Two additional steps to the current overseas-based repayment regime.
An information sharing agreement between Inland Revenue and the Department of Internal Affairs will be implemented, once the relevant regulations have been approved later in 2013, to allow sharing of contact details for overseas-based Student Loan defaulters when they renew or apply for their passport.
All changes are subject to legislation to be introduced later in 2013.
Paying back the full amount
You can pay back the full amount of your loan at any time.
Before you make a final payment, make sure you check with Inland Revenue to find out your final loan balance.
You can view a complete balance of your Student Loan through Inland Revenue’s online services – you need to register for an Inland Revenue online services account to do this.
Inland Revenue administration fee
There will be a $40 administration fee charged on your loan account for each tax year that you have a loan balance with Inland Revenue, unless:
- you are charged a StudyLink establishment fee for that tax year, or
- your loan balance with Inland Revenue on 31 March of that tax year is less than $20.
The administration fee will be added to your loan balance on 1 April of each applicable year. The amount of the administration fee may be increased from time to time and you will be given notice of any increase.
Knowing how much you've paid back
For the tax year ended 31 March 2013
If your only income is from salary or wages, a Student Allowance, or a benefit, you won't have to file a tax return, but you may receive a personal tax summary at the end of the tax year (31 March).
If you do receive a personal tax summary, you'll also get an end-of-year repayment calculation.
Your end-of-year repayment calculation will show whether you've paid enough towards your Student Loan, or whether you need to pay more.
If you paid more towards your Student Loan during the year than you needed to, you need to let Inland Revenue know what you want to do with the overpayment.
If you underpaid your Student Loan for the year, you will have until 7 February of the next year (or 7 April if you have a tax agent) to pay this amount in full.
The student loan repayments your employer deducts each pay period from your salary or wage will usually be considered your final repayment obligation on this income.
If you use the right tax code (with the “SL” repayment code), the right amount for your student loan repayment will be deducted from your pay. This means you’ve met your repayment obligations on this income, unless there’s been a significant over- or under-deduction.