Interest and other charges
Check the interest rates for your student loan and other charges that may apply.
- Qualify for an interest-free student loan
- How interest is calculated
- Interest rates
- Late payment penalties and late payment interest
- Annual administration fee
Qualifying for an interest-free student loan
If you're a New Zealand-based borrower, your loan is interest-free. You'll still see interest being applied, but this is automatically written off.
If you're an overseas-based borrower (overseas for 184 or more days) your loan will no longer be interest-free. There are certain situations where you may still qualify for an interest-free loan while you're overseas.
If you've been an overseas-based borrower and return to New Zealand, you'll qualify for your loan to be interest-free once you've been back for the required number of days (183 days).
Interest write-offs for previous tax years
Find out more about other student loan interest write-offs that were available before 1 April 2007
How interest is calculated
Daily interest
Interest is calculated on your daily loan balance using the current interest rate and will be added to your loan balance annually.
Your daily loan balance changes each time you make a repayment or another loan transaction is applied to your account.
The following formula is used to calculate your daily interest:
(Daily loan balance x interest rate) x (the number of days in the period divided by 365) is total daily interest for the period
Example
Lily is an overseas-based borrower and not on a repayment holiday. Her loan balance is $15,000 at the beginning of the tax year (1 April 2012). She's required to pay $1,000 for her overseas based repayment obligation and she also makes one voluntary repayment.
| Date paid | Repayment | Amount |
|---|---|---|
| 30 September 2012 | Repayment obligation payment | $500 |
| 30 September 2012 | Voluntary repayment | $400 |
| 1 March 2013 | Repayment obligation payment | $500 |
A new daily interest calculation starts each time Lily makes a repayment. Her interest calculation is as follows:
Interest calculation from 1 April 2012 to 30 September 2012
($15,000 x 6.4%) x (183 divided by 365) is $481.31
Note
For the purposes of calculating interest for the rest of the year, the daily interest calculated to 30 September 2012 ($481.31) is not added to Lily's loan balance yet. Lily will see this interest on her loan if she checks her balance.
Interest calculation from 1 October 2012 to 1 March 2013
(($15,000 - $900) x 6.4%) x (152 divided by 365) is $375.79
Note
The loan balance which daily interest is calculated on is now $14,100, which is less her repayments of $900.
Interest calculation from 2 March 2013 to 31 March 2013
(($14,100 - $500) x 6.4%) x (30 divided by 365) is $71.53
Lily's loan balance at the end of the tax year, including her daily interest, is $14,528.63. ($13,600 + $481.31 + $375.79 + $71.53)
Compound interest
Your daily interest for the year is added to your loan balance annually. This means the balance we'll charge interest on for the next tax year includes your previous year's daily interest.
In the example above, Lily's new loan balance for calculating her daily interest, as at 1 April 2013 increases from $13,600 to $14,528.63.
If Lily was a New Zealand-based borrower, her daily interest totalling $928.63 would be written off. Her loan balance would not be increased by this amount.
Interest rates
The interest rates are reviewed each year. If a new interest rate applies, it will be effective from the 1 April.
The following table shows the current and previous interest rates for 5 years.
| Tax year | Total interest rate |
|---|---|
| 1 April 2012 to 31 March 2013 | 6.4% |
| 1 April 2011 to 31 March 2012 | 6.6% |
| 1 April 2010 to 31 March 2011 | 6.6% |
| 1 April 2009 to 31 March 2010 | 6.8% |
| 1 April 2008 to 31 March 2009 | 6.7% |
Find out more about all previous rates
Late payment penalties and late payment interest
If you don't meet your repayment obligations by the due date, you may be charged late payment penalties or late payment interest on the unpaid amount.
Note
Up to 31 March 2012 these late payment charges are called late payment penalties, and from 1 April 2012 they are called late payment interest.
These are charged and added to your unpaid amount from the day after the due date, and then monthly until the amount is paid in full. This includes paying any late payment charges.
Late payment charges are calculated using the rate from the table below.
| Date | Late payment penalty or interest | Rate of late payment charge |
|---|---|---|
| From 1 April 2012 | Late payment interest | 0.843% |
| From 1 April 2007 to 31 March 2012 | Late payment penalty | 1.5% |
| Before 1 April 2007 | Late payment penalty | 2% |
Example
Jake had a repayment obligation of $600 to pay for the 2011 tax year which was due 7 February 2012. Jake checked his student loan using his online services account on 15 May 2012 and realised he hadn't made this payment.
Jake saw these charges:
| Date | Transaction | Credit | Debit | Balance |
|---|---|---|---|---|
| 1/04/2011 | Repayment obligation | 600.00 | 600.00 | |
| 8/02/2012 | Late payment penalty | 9.00 | 609.00 | |
| 8/03/2012 | Late payment penalty | 9.13 | 618.13 | |
| 8/04/2012 | Late payment interest | 5.21 | 623.34 | |
| 8/05/2012 | Late payment interest | 5.25 | 628.59 |
These charges were calculated as follows:
| 8/02/2012 | Late payment penalty charged at 1.5% on $600.00 | 9.00 |
| 8/03/2012 | Late payment penalty charged at 1.5% on $609.00 | 9.13 |
| 8/04/2012 | Late payment interest charged at 0.843% on $618.13 | 5.21 |
| 8/05/2012 | Late payment interest charged at 0.843% on $623.34 | 5.25 |
Jake pays $628.59 through internet banking, which is his total unpaid amount including the late payment penalty and late payment interest charges.
If you disagree
Find out what you can do if you disagree with the details on your statement
Annual administration fee
An annual administration fee of $40 will be charged to your account if you have a student loan balance of $20 or more as at 31 March each year.
The administration fee reflects the costs incurred by Inland Revenue in administering student loan accounts.
Back to Check how much you owe
Date published: 12 Mar 2012
Back to top