The University year is getting started, and for many students, it’s the first time taking responsibility for their own finances. It can be challenging to bring in enough money to live on while studying a demanding course — especially with the cost of living rising dramatically over recent months.
There are many ways to stay financially resilient while you study. It’s a good idea to put away some savings before you start, and to take a part-time job if you can. Many students also choose to live at home while studying to save on accommodation. Applying for a student loan is another great option to stay financially stable while you study. Student loans can help cover your course fees, study materials, and living costs too. Here’s a guide to how the loan works, who is eligible, and how to apply.
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Why Should I Get a Student Loan?
For a start, it’s the cheapest money you’ll ever borrow! If you remain living and working in New Zealand after your study, your student loan stays interest free for your whole life. This means that you don’t need to worry about moving between jobs or taking time off from paid work, because your debts won’t escalate.
Also, you don’t start making repayments until you earn over $20,280 a year. At this point, repayments of 12% of your earnings will be automatically deducted from your pay. While this sounds like quite a large proportion, it ensures that those earning high salaries are paying larger amounts than those on a lower wage. And if you never reach the income threshold, you’ll never have to pay your loan back.
If you choose to live and work overseas, things look a little bit different, but the interest charged is still not high in comparison to standard loans.
Am I Eligible For a Student Loan?
If you’re studying an approved course and you’re a New Zealand citizen or resident, you’re eligible. You can check if your course is approved on the study spy website.
There are also various other categories of people who are eligible for student loans, like refugees and those on an Afghan Emergency Resettlement Visa. You can read about the full eligibility criteria here, or take StudyLink’s eligibility test.
It’s worth knowing that if you're under 18, one of your parents needs to give their permission for you to get a loan.
What Can I Spend My Student Loan On?
That depends on whether you’re studying full time or part-time. If you’re a full-time student, you can use the loan to help pay for your course fees, study materials, and living costs. If you’re a part-time student, you can only get a loan for your course fees.
Another thing to note if you plan on studying part-time is that if you are working while you study, and earn over the income threshold of $20,280, your loan repayments will start to be deducted from your income.
It’s important to check whether you’re eligible for fees-free study too. If you are, you won’t need a loan to cover your course fees. Find out if you qualify here.
How Much Can I Borrow?
You can borrow the entirety of your course fees, whether you study part-time or full time. For living costs, the maximum you can borrow is $242.53 a week, and for course-related costs, the maximum is $1,000 per year. You can choose how much you want to borrow, and you don’t have to take out the maximum rate.
What’s The Difference Between a Student Loan and a Student Allowance? Can I Get Both?
Some students are eligible for a student allowance. This is money to help with living expenses that, unlike a student loan, you don’t have to pay back. If you’re under 24, your parents’ income will be the key deciding factor in whether you qualify for an allowance.
There’s a handy calculator on the IRD website to help you find out how much allowance you might be entitled to if any. You can also read more about the student allowance on the StudyLink site.
A student allowance can be combined with a student loan, but it’s important to know that the living costs are capped at $242.53 a week overall. So if for example you’re entitled to $100 a week as an allowance, your loan for living costs will be capped at $142.53.
One other financial option for students that’s frequently overlooked is scholarships. There are many scholarships to help with living costs, and it’s definitely worth checking them out and seeing if you’re eligible to apply. Visit the MoneyHub Scholarships guide for more information.
How Do I Apply For a Student Loan?
You apply for a student loan via StudyLink. The process varies depending on whether it’s your first time applying or you’ve applied before. If you’re studying for more than one year, you need to apply for a loan for each year you’re studying. The loan doesn’t automatically carry over.
Find out more about applying for the first time, applying when it's been a while and applying as a returning student.
When Should I Apply?
The earlier the better! By applying early, you can make sure you get the correct payments at the right times. If you haven’t finalised which course you’re taking or where that doesn’t matter. You can apply before you’ve even confirmed this.
However, if it takes you a while to get around to applying that’s okay too. You can apply after your course starts, and right up to when it’s finished. However, you must send all the relevant documents to StudyLink before the end of your course.
How Do I Repay My Student Loan?
You will start repaying your student loan when you’re earning $20,280 or above. Once you cross this income threshold, you will pay back 12% of your earnings, until your loan is paid off. It’s automatically deducted from your earnings by Inland Revenue, so you don’t need to do anything.
If you spend more than six months overseas, you will be charged interest of 3.5% per year. You will also need to repay between $500 and $2,500 every six months, regardless of your income. So if you plan on living overseas and working in low-income jobs or taking a break from paid work, you’ll need to budget to afford the necessary repayments. You might remember the high-profile arrests of people returning to New Zealand who’d failed to keep up their student loan repayments. Best to avoid that situation!
Want to Know More?
Hopefully, this article has answered some of your student loan questions. For more information and to apply for your student loan, visit studylink.govt.nz.