Guide to student loans: Student loan glossary
Student loan glossary
Adjusted net income - applies from 1 April 2012
Adjusted net income for a borrower means their annual gross income, excluding salary or wages (but including casual agricultural or election day work income), less annual total deductions that may be claimed.
If a borrower has a loss from an investment or business activity, neither the income or the deductions from that activity are included in calculating adjusted net income. If a borrower has separate business or investment activities which are normally carried out in association with each other, a loss from one business or investment activity can be offset against other like income.
Any deductions the borrower can make for an asset used in more than one business or activity will need to be apportioned between those different businesses or activities on the basis of the use of the asset.
Administration fee
An annual fee charged to cover the cost of administering a borrower's loan account.
Annual repayment threshold
The annual amount a New Zealand-based borrower may earn in a tax year before they have a repayment obligation.
Repayments for borrowers earning salary or wages are based on the pay period repayment threshold.
Annual total deductions
Expenses and deductions that can be claimed for the tax year.
Extra deductions
Extra deductions are in addition to standard student loan repayment deductions an employer makes from a borrower's salary or wages.
Extra deductions may be voluntary (when a borrower asks their employer to deduct an extra amount from their salary or wages) or compulsory (when we instruct an employer to deduct an extra amount to recover significant under-deductions from a borrower's salary or wages).
Extra repayments
See voluntary repayments.
Interest-free
Student loans for New Zealand based borrowers (including those borrowers treated as being New Zealand-based) are interest-free. Interest charged is written off.
Interest charged while a borrower is overseas-based is not written off.
Interim payment
Payments a borrower must make during the year towards adjusted net income repayment obligation.
Late payment penalties/late payment interest
Late payment penalties or late payment interest may be charged on unpaid amounts
Note
Late payment penalties are charged up to 31 March 2012 and late payment interest is charged from 1 April 2012.
Charges are added to the unpaid amount from the day after the due date, and then monthly until the total amount, including the late payment charges, are paid in full.
Loan advance
The money StudyLink makes available to a borrower under the Student Loan Scheme. It covers establishment fees and any other charges associated with a loan contract.
Net income - tax years 2012 and prior
A borrower's gross income (before tax), less expenses and deductions incurred in the tax year.
New borrower
For the purpose of the end-of-year repayment obligation a new borrower is someone who has no total loan balance on the first day of the tax year and borrows through the Student Loan Scheme on or after 1 January up to and including 31 March of the tax year.
New Zealand-based borrower
A person is a New Zealand-based borrower if they have been living in New Zealand for 183 or more consecutive days or have approval to be treated as New Zealand based while overseas. New Zealand based- borrowers' loans are interest-free.
If an overseas-based borrower returns to New Zealand, they'll become a New Zealand-based borrower when they've been back in the country for 183 consecutive days. They can leave New Zealand for up to 31 days during this period and still qualify as New Zealand-based. If they're absent for 32 or more days, a new 183-day period will start as soon as the borrower returns to New Zealand. Once a borrower has met this 183 day rule, they are treated as New Zealand-based from the first day of the 183 day period.
Overseas-based borrower
An overseas-based borrower is someone who has been overseas for 184 or more consecutive days (about six months). They become an overseas-based borrower from the day after leaving New Zealand.
Overseas-based borrowers have different repayment obligations and their loan is no longer interest free.
Overseas-based repayment obligation
A repayment obligation for an overseas-based borrower, based on their total loan balance.
Pay period repayment threshold
The set amount which can be earned in a pay period before student loan repayments need to be made from salary or wages for borrowers using a main job tax and repayment code. Borrowers who earn over the pay period repayment threshold have 12 cents in each dollar above the threshold deducted for their student loan.
The pay period repayment threshold for a secondary job is nil so borrowers will have 12 cents in each dollar deducted from their gross income.
The pay period repayment threshold is based on the annual repayment threshold (eg, if a borrower is paid weekly, the annual repayment threshold is divided by 52 weeks).
Pre-taxed income
Pre-taxed income is income earned or received from specific sources that has generally already had tax deducted from it (ie, PAYE, RWT etc) but has not had any student loan deductions.
Reduced late payment interest
This is an annual rate 2% lower than the late payment interest rate. When a borrower has an unpaid amount they are paying off through an instalment arrangement, they’ll have the reduced rate charged in the months they keep to the terms of the instalment arrangement. When charged to the account the amount is worked out as a monthly rate.
Repayment deduction exemption
An exemption for New Zealand-based borrowers in full-time study and working that means they don't need to:
- use the "SL" repayment code
- have student loan repayment deducted from their salary or wages.
Repayment holiday
A period of up to 365 days during which borrowers don't have an overseas-based repayment obligation to pay. Borrowers need to apply for a repayment holiday.
Note
Interest is still charged during a repayment holiday.
Repayment obligation
The minimum amount a borrower must pay towards their student loan.
Repayment obligations for New Zealand-based borrowers are based on income. Overseas-based borrowers' repayment obligations are based on their total loan balance.
Significant over-deduction
When the student loan deduction from a borrower's salary or wages is more than needed to meet their pay period repayment obligation and the amount exceeds the threshold we have determined.
Significant under-deduction
When the student loan deduction from a borrower's salary or wages is less than needed to meet their pay period repayment obligation and the amount exceeds the threshold we have determined.
Special deduction rate
A borrower can apply for a special deduction rate to reduce the amount of student loan deductions that would normally be required from their salary or wages income.
Standard deduction rate
Borrowers who have salary or wages must have deductions made at the standard deduction rate when their income goes over the pay period repayment threshold for their main job and from the first dollar of gross income for any secondary job.
The standard deduction rate is:
- 12 cents in the dollar for tax years from 1 April 2013
- 10 cents in the dollar for tax years before 1 April 2013 .
Unpaid amount
All or part of a repayment obligation not paid by its due date and/or any late payment penalties and/or late payment interest charged.
Unused repayment threshold
For the purposes of the end-of-year repayment obligation this is the amount by which the annual repayment threshold exceeds any salary or wage income (excluding casual agricultural or election-day work income). It can be used against any adjusted net income when calculating whether there is an end-of-year repayment obligation.
Voluntary repayments
Extra repayments made on top of a borrower's repayment obligation for a tax year. They can be either a single lump sum or smaller amounts paid throughout the year. Extra repayments include voluntary extra deductions a borrower makes from their salary or wages. For tax years 1 April 2009 and up to and including 31 March 2013 an extra repayment may have qualified for the voluntary repayment bonus.
Date published: 28 Mar 2013
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