Moving overseas? Don’t forget about your student loan.

With our borders once again open and the promise of life-changing experiences on offer, it’s no surprise an estimated tens of thousands of young New Zealanders are thinking about, or planning, a move overseas.

For many young people, this is an opportunity to use their newly-earned skills and qualifications on the world stage. To live away from family, to see the world. To start building their future.

It’s also a time of increased responsibility. As fun as it is to live and work overseas, somewhat untethered from the reality of life at home, some home-related pressures remain: Supporting family or whānau, maintaining friendships from afar and, you guessed it, repaying their student loan.

Making the decision to study and choosing to take up a student loan to achieve that goal is an investment in your future self. When you make the move overseas, how you need to manage your New Zealand student loan will change. Knowing how it will change for you, and what you need to do about it, means there’ll be no surprises later.

When will I be considered overseas-based?

Once you’re away from New Zealand long enough to be considered ‘overseas-based’, your student loan changes from something that happens in the background to something that requires active management on your part. If you’re planning to spend a considerable amount of time outside of New Zealand, it’s important to know when this might happen for you.

The first thing to figure out is how long you plan to be away. Most simply, the date you’re considered ‘overseas-based’ depends on how long you’re outside of New Zealand.

If you’re away for less than 153 days, you will still be considered ‘New Zealand-based’. Away more than 184 days, you'll become ‘overseas-based’. Away between 153 and 184 days? It depends on your situation. If you travel a lot, it can get a little tricky.

The best way to figure this out for you is to use our ‘Overseas travel calculator’ available in myIR. Don’t have a myIR account? Register now via our homepage at ird.govt.nz

What happens when I become overseas-based?

When you become overseas-based there are some big changes you need to be aware of:

Your student loan payments will no longer be taken from your salary or wages (at least for the majority who are not self-employed).

This means you'll now have to actively manage your repayments with us through your bank.

When you’re a based here in New Zealand, if you have an employer, your payments are taken directly from your salary or wages. Once you become an overseas-based customer, you’re responsible to make these payments yourself. This means you’ll need to find which payment method works best for you and ensure these payments are made on time. For more about overseas payment options visit https://www.ird.govt.nz/managing-my-tax/make-a-payment/ways-of-paying/paying-from-overseas

The amount you owe each year will be based on the size of your loan, not what you earn.

This means that no matter what you earn while you’re away, your loan repayments will be a set amount. It’s no longer based on the amount you earn.

Each year you’ll receive a student loan assessment outlining how much you need to pay, and when. You’ll have two repayment obligations each year, due by 30 September and 31 March. While not required, we do recommend you plan for smaller, more regular payments throughout the year, if you can. Making fortnightly or monthly payments, for example, will likely save you interest and help you pay off your loan faster. ?

Check this table to see how much you’d need to pay each year based on the size of your loan https://www.ird.govt.nz/student-loans/living-overseas-with-a-student-loan/repaying-my-student-loan-when-i-live-overseas

Interest will now be applied to your loan

Your student loan will no longer be interest-free from the day after you leave New Zealand. This interest is applied at a rate of 2.8%. Interest is calculated daily and added to your loan balance at the end of the tax year.

This will impact the total amount of the loan and how long it will take you to pay it back. If you miss a repayment due date, late payment interest will be applied to the overdue amount at a rate of 6.8% (made up of 2.8% base interest and 4% penalty interest).

In some cases, you may be able to keep your student loan interest-free, depending on the reason you are overseas. Find more details here https://www.ird.govt.nz/student-loans/moving-overseas-or-returning-to-new-zealand/i-am-moving-overseas/can-i-keep-my-student-loan-interest-free-overseas

Tips to stay on top of your loan when overseas:

• Register for a myIR account and set up notifications: Staying in touch with us while you’re living overseas is key to staying on top of your loan. Sign up for a myIR account before you leave and set up notifications so you don’t miss important updates from us. We also recommend adding your overseas contact number, once you have one.
• Set up small, regular repayments: Instead of waiting for the two lump sum repayment dates each year in September and March, set up more regular payments, if you can. You’ll likely save on interest, and in turn pay off your loan sooner.
• If you get into trouble, let us know sooner than later: The sooner you tell us you’re unable to make a payment, the more options we have to help you. Ask us about setting up an instalment arrangement or applying for hardship. Note that missed, forgotten or skipped payments can incur late payment interest of 6.8%.
• Nominate someone you trust If you need help to manage your student loan while you’re away, you can choose to nominate someone to liaise with us on your behalf. We’ll still send all loan-related communication to you, but your nominated person can manage payments and contact us with questions. You’re still responsible to ensure your loan is paid on time. For more about nominating someone visit our website https://www.ird.govt.nz/managing-my-tax/getting-someone-to-act-on-my-behalf/nominated-person/let-someone-act-on-your-behalf

*You can choose to take a break from repaying your student loan for up to 12 months while you travel overseas. If you want to take up a ‘temporary repayment suspension’ you need to let us know either before your leave New Zealand or within 6 months of leaving.

During a temporary repayment suspension, interest is still charged to your loan (2.8%) but repayments are not required. A temporary repayment suspension works best when you only intend to be out of the country for a shorter period of time (up to around 18 months).

If you can’t make a repayment

When you’re away starting the latest chapter in your life, we know your student loan probably isn’t going to be top of mind. This doesn’t change your responsibilities as a student loan borrower. The result of not managing your loan can impact you in real ways when you return to New Zealand, whether that’s by choice or by necessity. That’s why knowing your responsibilities and planning ahead is so important.

Please contact us before you miss a repayment due date

We know that even with the best planning and best of intentions, life happens, and there are some situations we can’t avoid. The last couple of years have shown us that. We recommend you reach out to us as soon as you think you might be in trouble. We can work with you to discuss options like setting up an instalment arrangement or applying for hardship relief.

Once you’re considered overseas-based, you’ll have a lot more responsibilities on your plate. You’ll need to manage payments yourself, of a different amount than you’re used to, and with added interest. Not the happy news you want to hear when you’re excited about your move overseas! But like with your trip, and before that, your study, planning ahead and setting up new routines and support systems around you will ultimately set you up for success.

By knowing what to expect before you take off to foreign lands, you’ll be in the best position to start the next chapter of your future.?

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