Tens of thousands of pensioners continue to pay their student loans

Tens of thousands of people past retirement age are still paying off their student loans, government figures show.

Christchurch woman Sarah, who does not want to be identified, has been paying off a student loan for much of her adult life.

She initially earned a bachelor’s degree in sociology and geography and also has a degree in event management. She graduated with about $40,000 in debt.

She has since paid that amount up to $5,000, but now faces the prospect of increasing it again so she can retrain as a teacher.

“I find it demoralizing to be 40 and still have a loan. I feel like I will never get ahead and I made so many decisions that just didn’t set me up for financial success.”

Financial mentors say student loan debt can linger with people for a long time.

An Auckland financial mentor said people who had had low incomes throughout their lives were sometimes surprised to discover their pension was being docked to pay off a student loan.

“They wouldn’t pay it with a benefit… I don’t think people realize that when you get a pension you have to start paying off your student loan with a pension.

“When I say ‘look, they just don’t have any money,’ they tell me ‘they have to pay it back at some point.’ I think a lot of people who haven’t made much money after studying will be quite surprised about that.”

He said between half and three-quarters of the pensioners he dealt with had a student loan.

Financial adviser Shula Newland said someone with a student loan could also find income from KiwiSaver and other investments was used to pay it off.

He said recipients were often encouraged to study as a way of getting off the benefit, but could be left with a loan to gain a qualification in a field that did not pay well.

According to her, it was possible to request that student loan payments be suspended due to hardship.

Fincap senior policy adviser Jake Lilley said there should be a mechanism for debt collectors to see the bigger picture of what is being achieved.

“To take a step back and say ‘wait a minute, what are we trying to accomplish here in general?’ We want this person to be able to live a comfortable life and not have problems that come from poverty that arises when you can’t afford things and you end up with a bad outcome that has a cost associated with it, (like) hospitalization…yeah. Studylink debt prevents someone from turning on the heating if they need it.

Currently, people must make payments of 12% of every dollar earned above $24,128 a year. A single person living alone would receive a pension of just over $31,500 a year.

Government data showed that as of June 30, 2023, there were 21,710 student loan borrowers aged 65 or older. Of these, just under 16,600 resided in New Zealand.

Sarah said she was worried about having a loan that would drag on into the future.

“Before I treated it like a tax that I would just have to pay. Now I would like to have the money, but if I want a better career option, I have to do it.”

By Susan Edmunds for rnz.co.nz