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Remember your student loan before venturing abroad

Image from Inland Revenue (Facebook)

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Wellington, October 29, 2022

With New Zealand’s borders open, tens of thousands of young Kiwis are planning a move overseas, carrying their newly earned skills and qualifications on the world stage.

It is also a time of increased responsibility and some home-related pressures remain, including repaying a student loan.

The result of not managing student loans can impact borrowers in real ways when they return to New Zealand, and hence, knowing about the obligations and planning is important.

Once someone is away from New Zealand long enough to be considered ‘overseas-based,’ the student loan changes and hence requires active management.

Borrowers are classified as New Zealand based (being away for less than 152 days), and Overseas based (184 days).

Inland Revenue Department website has an in-built Overseas Travel Calculator.

When a borrower becomes overseas-based, student loan payments are no longer taken from salary or wages and borrowers have to make the payments themselves. This means finding a payment method that works best for their situation and ensures that their payments are made on time.

The amount owed each year is based on the size of the loan, not what someone earns, so the loan repayments are a set amount. Each year there are two repayment dates – 30 September and 31 March. Payments can be made fortnightly or monthly.

Interest accrual

Interest will now be applied to student loans from the day after someone leaves New Zealand. This interest is applied at a rate of 2.8%. Interest is calculated daily and added to the loan balance at the end of the tax year. Late payment interest applied to the overdue amount is 6.8% (made up of 2.8% base interest and 4% penalty interest).

However, in some cases, the student loan can remain interest-free, depending on the reason a borrower is overseas.

There is the option of a temporary repayment suspension’ if people want to take a break from repayments. IR needs to know either before someone leaves New Zealand or within six months of leaving. During a temporary repayment suspension, interest is still charged to your loan (2.8%), but repayments are not required.

Some IRD Tips

Register for a myIR and set up notifications to stay in touch with IR while overseas

Set up small, regular repayments

Let IR know sooner than later if there’s an issue paying on time.

Nominate someone in New Zealand to manage the loan.

For more about student loans, visit ird.govt.nz/myloan

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