What happens to your student loan when you leave
The repayment rules change completely the moment you become overseas-based, and the change is not in your favour.
On this page
- Based here
- A share of income above a threshold
- Based overseas
- Fixed amounts set by balance
- Interest here
- None, while you stay
- Interest overseas
- Applies
Two completely different systems
While you are New Zealand-based, repayments are a percentage of what you earn above a threshold, taken through PAYE. Earn less and you repay less; earn nothing and you repay nothing. The loan does not accrue interest.
Once you are overseas-based, repayments become fixed amounts set by the size of your balance, owed whether or not you are earning, and interest applies. Your income stops being part of the calculation entirely.
The switch is about days, not intentions
You become overseas-based after a set number of consecutive days away, and it is not a decision you make or a form you choose to file. People who left intending a short trip and stayed are one way this goes wrong, because the obligation started without anything visibly happening.
Why it compounds quietly
Missed fixed repayments attract late payment interest on top of the interest already applying, so a balance left alone for a few years overseas can be meaningfully larger than the one you left with. This is one way a student loan can become a problem rather than a background deduction.
If you are going, find out where you stand before you leave rather than after. There are arrangements for people who contact Inland Revenue, and considerably fewer for people who do not.
The repayment holiday, and what it is not
There is a temporary repayment suspension available to people going overseas, applied for through Inland Revenue, which pauses the fixed repayment obligation for a limited period. It does not pause interest. A balance on a repayment holiday still grows, so the holiday buys time rather than money, and it has to be applied for rather than assumed.
Coming back matters too. Once you are New Zealand-based again, the percentage-of-income system resumes and interest stops applying going forward, but interest already added stays on the balance. People who spent several years away often return to a loan larger than the one they left with, repaying it under rules that assume it never grew.