Student Loan Hardship in New Zealand: Using Medical Grounds to Stay Interest-Free while Overseas articles

Date

23 Oct 2025

Related Expertise

How Can Your Loan Stay Interest-Free While Overseas?

New Zealand’s student loan scheme is unique in that loans remain interest-free while borrowers live in New Zealand. But once you move overseas, interest typically starts to accrue on your loan balance. Despite this, there are some limited exceptions that allow you to keep your loan interest-free even if you live abroad.

One key exception relates to serious illness, injury, or disability. If you are unable to work due to health reasons, or if your condition poses a serious and imminent risk to your life, you may qualify for an interest-free status on your student loan while overseas. This provision reflects the government’s recognition of hardship in such circumstances and is outlined in the Student Loan Scheme Act 2011.

Eligibility Criteria

To qualify for interest-free status while overseas due to health reasons, your situation must meet one of the following:

You cannot engage in paid work, except for token or very low wage work.
Your condition creates a serious and imminent risk of death.

This rule applies both to interest charges and repayment obligations from 1 April 2020 onwards. In some cases, repayments can be adjusted based on your actual income rather than the standard overseas repayment formula used by Inland Revenue (IRD).¹

Applying for Interest-Free Status

To apply, you will need to provide:

A medical certificate or doctor’s letter confirming your illness, injury, or disability and how it affects your ability to work.
Proof of income if you have any, such as payslips or benefit statements.

Applications can be submitted via IRD’s MyIR online services or by post. IRD may also request additional financial information, such as bank statements, depending on your circumstances.²

Why Consult a Student Loan Lawyer?

Navigating student loan obligations while overseas can be complex and stressful. Many borrowers are unaware of their rights and options until it’s too late. Dave Ananth, a tax barrister with extensive experience in student loan law, has been instrumental in helping New Zealanders overseas negotiate repayment terms and avoid unnecessary penalties. He highlights that understanding your eligibility for interest-free status or repayment adjustments can significantly reduce financial stress and prevent loan balances from ballooning due to interest and penalties.

A student loan lawyer can assist you by assessing whether you qualify for interest-free status, preparing applications with the correct documentation, negotiating with IRD, and exploring hardship provisions or potential write-offs if applicable.

Recent Context on Student Loans and Overseas Borrowers

As of 2025, New Zealand holds over $16 billion in student loan debt, with more than $4 billion owed by borrowers living overseas. IRD has ramped up efforts to track and collect repayments from overseas borrowers, including advanced data mining techniques. This has led to increased pressure on Kiwis abroad, sometimes deterring skilled New Zealanders from returning home due to fears of penalties and enforcement actions.³

Dave Ananth has publicly advocated for fairer treatment of overseas borrowers, urging reforms to make the system less punitive and more supportive, especially for those facing genuine hardship or complex financial situations

If you are overseas and concerned about your student loan, it’s crucial to get expert advice early. Contacting a student loan lawyer can help you understand your options and protect your financial wellbeing.

For assistance, reach out to Special Counsel Dave Ananth at davea@shlaw.co.nz