Debt. It’s often considered a scary word, but most people would agree there is good debt and bad debt in this world. A student loan would most likely be considered good debt (especially when it’s interest free) – it’s an investment in your future, right? But amongst all that studying (and just a little partying) it’s worth taking the time to consider how much we might really need and what happens when we need to pay it back.
What can you borrow?
There are three parts to a student loan in New Zealand (but that doesn’t mean we need to borrow all of them!):
Compulsory fees – these are tuition fees, which are paid directly to the university or institution by StudyLink
Course-related costs – a lump sum paid to your bank account, to cover things like books, stationery and computer items
Living costs – a set payment each week (the amount depends on your situation) credited to your bank account
How much are you actually borrowing?
With tuition fees paid directly to the university, and other payments received here and there, it can be hard to keep track! While studying, you can check your loan transactions using MyStudyLink online, or after studying you can request a current statement on the IRD website.
Is there any other way?
With regular money coming in to your account each week, it can be easy to feel like you’re being paid to study. The reality is that it needs to be paid back – with real money, so it’s best to only borrow what you need. You could consider getting a part time job while studying to reduce living cost loans, or challenge yourself to save your annual course-related costs with a summer job. The future you will be thankful, and we promise it won’t ruin all the fun.
How long will it take to pay off?
If you’re staying in New Zealand, the loan will be interest free, and the minimum repayments will be automatically deducted from your salary after you’ve finished university*
The average Bachelors degree of $21k has a median repayment time of 8.5 years.
You can make voluntary repayments, or request to have higher repayments deducted to have your loan paid off faster. Although if you have other debt incurring interest (eg. Mortgage or HPs) you should consider prioritising these.
Planning on moving overseas?
Dreaming of London’s big city lights or Sydney’s long summers? You’ll have to pay interest on your loan if you are overseas for more than six months. Before the big move, it might be worth working out how much more it will cost, and trying to pay off as much as possible while it’s interest free.
*(assuming you’re using the correct tax code and earning over the pay-period threshold)