Student support

Overall student support and student loan scheme

How many New Zealanders have a student loan?

As at 30 June 2010, 587,500 people had a student loan with Inland Revenue. In addition to these active loans, 278,000 people had repaid a loan. In 2010, 212,000 people accessed the Student Loan Scheme.

How much has the cost of new lending changed?

In 2010, the Government wrote down 45.25 cents for every dollar borrowed. This means that for every dollar borrowed, the Government will only receive the equivalent of 55 cents in today's dollar terms. This has improved from 2009 when the Government wrote down 47 cents per dollar lent. The 2011 Student Loan Scheme Budget package expects to reduce the write-down from 45.25 cents to 43.74 cents once the package is fully implemented. The Government will seek to reduce the write-down further over time.

What can students currently borrow for?

Student loans are intended to make sure that money is not a barrier to students being able to undertake tertiary education. Students are able to borrow for their course fees, and depending on their study load, can borrow up to $1,000 to cover course-related costs, and $169.51 per week to contribute to their living costs.

These loans are interest-free and only need to be repaid once the borrower is earning above $19,084 per year. The Government remains committed to interest-free student loans.

How much is the average amount borrowed?

As at June 2010, the average amount borrowed in the 2009 year was $6,991. The median amount borrowed was $6,101.

On average, how long does it take borrowers to repay their student loan?

As at June 2010, the median repayment time for those who finished study in 2006 was expected to be 6.5 years. Those who remain in New Zealand have a median repayment time of 4.6 years, compared with 13.9 years for overseas-based borrowers.

How many students borrow from the scheme?

Of those students who were eligible to access the Student Loan Scheme in 2009, 199,000 (71 per cent) did so. 894,000 students have accessed the Scheme since it was introduced in 1992.

How much is currently owed by students? What is it worth to the Government?

As at 30 June 2010, the nominal value of loan balances was $11.145 billion and the carrying value was $6.79 billion.

How large are the loan balances of students?

As at 30 June 2010, the average loan held by Inland Revenue was $16,731 and the median loan balance was $11,399.

How many student loan borrowers are now overseas and how much do they owe?

As at 31 March 2011, there were 91,072 borrowers overseas. These overseas borrowers owed a total of $2.281 billion. Of this amount, $202 million is in default.

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Overall student support changes

What are the student support changes?

The Government is:

  • Restricting student loan eligibility for borrowers with an overdue repayment obligation of $500 or more for more than one year from February 2012, affecting study from 7 February 2013. 
  • Shortening the repayment holiday for overseas-based borrowers to one year and requiring borrowers to apply for a repayment holiday from 1 April 2012.
  • Requiring students to provide a New Zealand-based contact person for all new loan applications relating to study starting on or after 1 January 2013. 
  • Restricting borrowing for people aged 55 and over to cover tuition fees only from 1 January 2013. 
  • Removing the entitlement for part-time, full-year students to borrow for course-related costs from 1 January 2012. 
  • Holding the repayment threshold to $19,084 until 31 March 2015. 
  • Broadening the definition of income for student loan repayment purposes to include adding losses back to income from 1 April 2012. 
  • Extending the exemption from the two-year stand-down period to include sponsored family members of “protected persons”.

Why is the Government making changes?

Changes to the Student Loan Scheme in Budget 2011 will ensure that student loan lending is good value by reducing lending to those who do not meet their obligations and increasing personal responsibility for student loan debt by encouraging repayments.

The New Zealand Student Loan Scheme is one of the most generous in the world, allowing open access to interest-free loans for all borrowers who remain in New Zealand. The purpose of the scheme is to enable all students to be able to access a quality tertiary education; however, increased access has come at a large cost to the Government.

These changes introduced in Budget 2011 will make the tertiary system more responsive to changes in demand and will enable government to better manage the cost of the Scheme. The savings generated will fund new tertiary education initiatives and return funding for the Government’s wider recovery priorities.

What are the impacts of the Student Loan Scheme package?

The impacts, once the package is implemented, are: 

  • Reduces the write-down of student loan debt from 45.25 cents to 43.74 cents for each dollar lent 
  • Increases the repayment obligations of approximately 22,000 New Zealanders by an estimated 60 cents per week in 2012, rising to an estimated $3 per week by 2015, by holding the repayment threshold until 2015 
  • Restricts student loan eligibility from 2013 for borrowers with overdue repayments
  • Restricts student loan eligibility from 2013 for borrowers aged 55 and over who will not be able to borrow for living or course-related costs
  • Brings forward the repayment obligations for overseas-based borrowers by tightening eligibility for the repayment holiday and reducing the length of the repayment holiday 
  • Removes the entitlement to borrow the $1,000 course-related cost component for part-time, full-year students.

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Restricting student loan eligibility for borrowers aged 55 and over to tuition fees only

Why is the Government doing this?

The Government recognises the gains from an educated population. However, the reality of limited resources means it has to reprioritise where it will invest funding for tertiary education.

Borrowers in older age groups have a lower return on investment than younger borrowers. Borrowers in older age groups are also more likely to be in the workforce for shorter periods than younger borrowers and less likely than younger borrowers to repay their loans.

As a result, the Government writes down more than 70 cents in every dollar it lends to people aged 55 and over. In contrast, people in their 20s are, in the main, able to repay their loans in around 5 years, which means that much less of their loans is written down.

While the average income of borrowers aged 55 and over is consistently below the median for all borrowers, these borrowers tend to have a higher net wealth with which to support themselves through tertiary study.

How much do these people borrow now?

In 2009, borrowers aged 55 and over drew down approximately $3.1 million in course-related costs and $8 million in living costs and $14.6 million in fees.

Are there any exceptions to this policy?

Yes. All current students over the age limit at the announcement date, or who will reach the age limit before the implementation date, will be able to borrow living costs and course-related costs after 1 January 2013 to complete the qualification in which they are enrolled on announcement (but only that qualification and not any related follow-on qualifications), or until 1 January 2015, whichever comes first.

When does it come into effect?

The policy comes into effect for study starting on or after 1 January 2013.

How much will this policy save the Government?

Once fully implemented, this policy will save an estimated $14 million per annum in operating costs and have an estimated five-year saving of $38.1 million in operating costs. The policy also has an estimated four-year saving of $8.3 million in capital costs.

As the New Zealand population ages at a faster rate, these savings will help prioritise funding to ensure in the future all New Zealanders are still able to access tertiary education.

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Removing course-related cost entitlements for part-time, full-year students

Why is the Government doing this?

The policy supports the Government’s objective of improving the return of the country’s investment in supporting students through their education. The policy: 

  • Will align student loan entitlements for part-time, full-year students with those for part-time, part-year students 
  • Recognises that part-time, full-year students have more opportunities than full-time students to meet the costs of their course-related materials by working 
  • Will reduce student loan borrowing and generate savings for the Crown.

When will this policy come into effect?

The policy will come into effect for study starting on or after 1 January 2012.

How is part-time, full-year study defined for student loan purposes?

Part-time, full-year students are defined as those studying for a minimum of 32 weeks in a year and with a course load of less than 0.8 of an equivalent full-time student (EFTS) measure.

What will part-time, full-year borrowers be entitled to borrow?

Part-time, full-year borrowers will still be entitled to borrow for compulsory fees.

How much do these people borrow now?

In 2009, 24,200 borrowers were in part-time, full-year study and 13,600 of these drew down course-related costs of $16 million. On average, every part-time, full-year student borrowed $979 from the maximum $1000 entitlement for course-related costs.

What are the savings associated with this policy?

This policy will have a four-year operating impact of $23.8 million and a capital impact of $27.1 million.

Are there any exemptions?

No. There are no exemptions to this policy.

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Requiring a contact person for all new loan applications

What is changing?

For study starting from 1 January 2013, borrowers applying for a student loan will be required to include details of an alternative contact person in their application.

Why is the Government doing this?

Often the contact details provided by a borrower become out of date after they complete study. This can be a particular issue if the borrower goes overseas. Although there is a legal requirement to provide an address when going overseas, most borrowers do not do so. Having an alternative New Zealand contact person gives another way for Inland Revenue to keep in touch with borrowers to help them manage their loan.

Currently, borrowers have the option to nominate a person who has access to their loan information. This policy extends on this and requires that every new loan application include a contact person as one of the conditions to access a student loan.

This policy would extend the network of support for borrowers to meet their repayment obligations. We expect an increase in repayments and a reduction in defaults as a result of this policy.

How and when will the contact person information be required?

Every new student loan application relating to study starting on or after 1 January 2013 will be required to include a contact person as one of the conditions to access student loans. Details required for a contact person include a name, a phone number, and an email and/or home address. This information will be collected by StudyLink during the loan application process, and will be passed on to Inland Revenue.

What are the savings associated with this policy?

The exact savings for this policy cannot be quantified at this stage but we expect an increase in repayments and a reduction in defaults as a result.

What will the contact person be required to do?

If Inland Revenue is unable to contact the borrower, it will then get in touch with the contact person to see if they have current contact details for the borrower. The contact person has no responsibility for the borrower’s student loan.

What information will be disclosed to the contact person?

No information about the borrower will be disclosed to the contact person other than the borrower’s name, the fact that they have a student loan and that Inland Revenue is currently unable to contact them. Further details such as student loan balance will not be disclosed.

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Extending exemption from two-year stand-down for new permanent residents to sponsored family members of “protected persons”

What is the exemption to sponsored family members of protected persons about?

Currently an exemption to the two-year stand-down for permanent residents and Australian citizens is given to refugees, families of refugees and protected persons, but excludes family members who are sponsored by protected persons.

The exemption will be extended to the sponsored family members of protected persons for both student loans and allowances.

Why is the Government doing this?

The exemption to sponsored family members of protected persons will ensure consistency with other government policy and with the Immigration Act 2009.

How will this policy work?

When a student applies for a student loan or allowance for study starting on or after 1 January 2012 and provides evidence that they were granted permanent residency via sponsorship by a family member holding protected persons status, they will be exempt from the two-year stand-down.

How many people will be affected?

This change is likely to affect only one or two people per year.

How will this policy be implemented?

StudyLink will update its systems, website and collateral to reflect the policy change. When a student applies for a student loan or allowance for study starting on or after 1 January 2012 and provides evidence that they were granted permanent residency via sponsorship by a family member holding protected persons status, they will be exempt from the two-year stand-down.

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Holding repayment threshold to $19,084 until 2015

Why is the Government doing this?

The decision to suspend inflation adjustments to the repayment threshold until 31 March 2011 takes into account the current economic climate and the significant cost of the Student Loan Scheme asset to the Crown.

The cost to Government of new lending (the amount the Government never expects to receive back over the life of the loan) has increased from 11 cents in the dollar in the 1990s, to 45 cents in the dollar currently.

The size of the group earning under the threshold, coupled with the large number of overseas-based borrowers, means that currently 58% of all borrowers do not have a repayment obligation. Suspending inflation adjustment of the repayment threshold will increase the amount collected in repayments by both increasing the number of people in New Zealand with a repayment obligation and increasing over time the amount that people repay as their income increases.

When does it come into effect?

The repayment threshold was set at $19,084 in April 2009 and will remain at that level until 31 March 2015.

How much more will people pay as a result of this policy?

On average people will pay an estimated extra 60 cents per week in 2012 increasing to an estimated $3 per week in 2015.

Who does this affect?

All New Zealand-based borrowers with a repayment obligation are effectively being asked to pay slightly more due to the suspension of the inflation adjustment of the repayment threshold.

How much will this policy save the Government?

This policy will have an estimated five-year operating saving of $162.373 million and an estimated five-year capital savings of $63.326 million. These savings also include the financial impact of holding the repayment threshold for the 2011/12 income year.

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Adding back losses to income for student loan repayment purposes

What is changing?

From 1 April 2012, New Zealand-based borrowers will no longer be able to use losses to reduce their repayment obligation on their student loan.

Why is the Government doing this?

Currently, business and investment losses are calculated into the definition of income for student loan repayment purposes. This means that borrowers who experience personal losses may not meet the current student loan repayment threshold and therefore not have a repayment obligation.

Allowing losses to be offset when calculating income for student loan repayment purposes is effectively subsidises business and investment decisions for student loan borrowers. This proposal and further review of rules relating to income will make the definition of income for student loan repayment purposes more consistent with Working for Families and Community Services Card income definition.

How many people will this policy affect?

Inland Revenue estimate that about 10,300 people will face an increased student loan repayment obligation as a result of this change. 2,500 of these would not previously have had a repayment obligation.

What savings will result from this policy?

The policy will have four-year operating savings of $2.94 million and four-year capital savings of $23.0 million.

How is a repayment obligation calculated for New Zealand-based borrowers?

The amount that borrowers resident in New Zealand must repay in any year is dependent on their income. This is currently based on income taxable to the borrower. For borrowers who earn solely salary or wage income, this is a reliable measure; however, it is not so reliable for those who earn other income, such as attributed company or trust income.

Is this change consistent with other Government policy?

The definition of income has recently been reviewed for determining eligibility for Working for Families tax credits and the Community Services Card. Reviewing the definition of student loan income will look to make income for student loan purposes consistent with other social policy income measures.

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One-year, application-based repayment holiday

What is changing?

Since 2007, borrowers have received an automatic three-year holiday from any repayment obligation when they leave New Zealand. This holiday period is being reduced to one year.

Borrowers will also now be required to apply for the repayment holiday and provide or confirm contact details for an alternative New Zealand contact. Borrowers who do not do so will not receive a repayment holiday.

When does this take effect?

The one-year holiday will be for borrowers leaving New Zealand from 1 April 2012.

What about borrowers already overseas on 1 April 2012?

Borrowers who are already overseas on 1 April 2012 will receive the lesser of one year or the period remaining of their existing holiday.

Why is the holiday period being reduced?

The reduction to one year still enables borrowers to take time to travel without having to make repayments on their loan. It reflects that student loan obligations are important, regardless of where borrowers live.

The current three-year holiday is generous and may result in some borrowers becoming used to not making any payments on their student loan. Compliance levels for those who remain overseas at the end of their repayment holiday are currently very low – most do not begin making repayments when their repayment holiday ends.

Why is the application requirement being introduced?

The application process is intended to ensure Inland Revenue has contact details for borrowers who are overseas, including an alternative New Zealand-based contact in case Inland Revenue is unable to contact the borrower directly. It is also intended to signal that student loan repayment obligations are important, and being granted a holiday from repayments is a not a right but a privilege.

How will this policy be implemented?

The Student Loan Scheme Act will be changed; Inland Revenue will communicate this to all borrowers.

Do overseas-based borrowers accrue interest?

Yes - borrowers who are resident overseas for more than 183 days accrue interest on their loan balance. This includes those borrowers who are on a repayment holiday. Currently, the interest rate is 6.6 per cent.

How are repayment obligations calculated for overseas-based borrowers?

Repayment obligations of overseas-based borrowers are calculated based on the balance of their loan. The repayment obligation is either $1,000, $2,000 or $3,000 per year (excluding any penalties or previous unpaid amounts). The maximum $3,000 annual repayment is for borrowers with a balance in excess of $30,000. However, borrowers are able to pay more than these minimum amounts.

Can you make payments while on a repayment holiday?

Yes, borrowers who have applied for and been granted a repayment holiday can still make voluntary repayments at any time. If these payments exceed NZ$500 in any one tax year and the borrower has no outstanding repayments, the borrower will receive a 10 per cent excess repayment bonus.

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Restricting student loan eligibility for those with an overdue student loan repayment obligation

Who will this policy affect?

This policy will affect all borrowers who have been in default on their student loan repayments for one or more years on overdue repayments of $500 or more.

Why is the Government doing this?

The Government has committed to ensuring student loan lending is value for money. Between 1998 and February 2010, approximately 5,700 borrowers took out a new student loan while having overdue repayments on a previous loan. These overdue repayments totalled approximately $19.4 million. This change will restrict borrowers with overdue payments of $500 or more, who have been in default for one year or more from further borrowing.

When does this policy come into effect?

This policy will apply to those in default from February 2012, for new lending from 7 February 2013.

How will this policy be implemented?

From 7 February 2013, StudyLink will run a check of each Student Loan application with Inland Revenue. Where Inland Revenue verifies that the applicant has been in default of their student loan repayments for one or more years on overdue repayments of $500 or more, the application will be declined.

Will there be any exceptions?

Yes, hardship provision will be available in many cases.

What savings will result from this policy?

This change will generate $10.1 million in operating savings and $10.1 million in capital savings over a four-year period.

Funding for aviation training

Student loan access for aviation students

In Budget 2011 the Government announced restrictions to student loan access for aviation students. These changes are no longer proposed to take effect in 2012. Any future changes will not affect those who begin studying in 2012.

Reduction of EFTS

The Government has agreed to reduce the equivalent full-time student (EFTS) cap for aviation training from 600 EFTS to 450 EFTS from 2012.

Need more information?

More information about the Budget 2011 changes to student support is available on the following websites:



Content last updated: 20 October 2011