Slow repayers: The characteristics of borrowers who make slow progress in reducing their student loans

Publication Details

This report looks at people who used the Student Loan Scheme (SLS) and left tertiary study between 2000 and 2006, and focuses on those who make slow progress towards repaying their loans.

Author(s): Nick Chen and Michael Webster, Tertiary Sector Performance Analysis, Ministry of Education.

Date Published: March 2013

Executive Summary

Slow repayment of student loans means people hold loans for extended periods, and this results in higher costs to the government. Half of all those who left tertiary education with a student loan in 2006, and remained in New Zealand, are expected to have paid off their loans in full in 5.2 years and three-quarters will have paid off in less than 10 years.  But for people on low incomes, the repayment rules in the loan scheme mean their repayment obligations are reduced. This means that there will always be some people who hold their loans over many years and there will be some who never repay in full.  Understanding the characteristics of the people who are likely to repay slowly provides information that can help shape policy on the student support system.
This report looks at people who used the Student Loan Scheme (SLS) and left tertiary study between 2000 and 2006, and focuses on those who make slow progress towards repaying their loans. It focuses on four cohorts of student loan borrowers, divided into two categories:

  • borrowers who left study in 2000, 2002 or 2004, before the introduction of interest-free loans for all New Zealand-based borrowers from April 2006;
  • borrowers who left study in 2006, following the introduction of the interest-free student loans policy.


It profiles those borrowers who made little or no progress in reducing their loans post-study. It also looks at the characteristics of borrowers who were always New Zealand-based after leaving study in 2006, and whose income was consistently below the student loan repayment threshold over the next three years.

Key Findings

Who were the slow repayers in the 2006 cohort?
46 percent of all borrowers who left study in 2006 still had 85 percent of their leaving balance outstanding after three years post-study. A significant proportion of borrowers who remained in New Zealand (40 percent) made little or no progress in repaying their loan over these three years, despite the removal of interest on their loans from 2006.

Slow repayers were more likely to:

  • be over 50 years old during their last study year
  • have studied below degree level
  • have failed to complete a qualification
  • have studied in fields where lower level courses were predominant, such as food and hospitality, society and culture, or creative arts
  • be Māori or Pasifika.


Borrowers who were overseas-based for a period after study were much more likely to be slow in repaying, compared with those New Zealand-based borrowers.

Who had income below the student loan repayment threshold in the 2006 cohort?

This paper also looked at New Zealand-based borrowers who were below the income threshold for student loan repayments for the first three years after leaving tertiary study. They were broadly associated with many of the same characteristics as the slow repayers in 2006. Borrowers under the threshold were more likely to:

  • be over 50 years old during their last study year
  • have studied below degree level
  • have failed to complete a qualification
  • have studied in fields where lower level courses were predominant, such as food and hospitality, society and culture, or creative arts
  • be Māori, Pasifika or Asian. This reflected the existence of a group of older Asian permanent residents (who were eligible for loans at that time, but mostly wouldn’t be now).
  • be female, reflecting time out of the workforce to raise children before the age of 35 years
  • have received more than half of their income in the form of an income-tested benefit in their third year after tertiary study ended.


Slow repayers from earlier cohorts

For the 2000, 2002 and 2004 cohorts, a slow repayer is defined as a borrower who has 75 percent or more of their leaving balance still outstanding five years post study. These borrowers may have been making some repayments, but interest and penalties incurred meant they had made little progress in repaying the loan principal. The characteristics of slow repayers in these earlier cohorts are not significantly different from the slow repayers from the 2006 cohort.

The focus in this report is on those who left study in 2006 or earlier.  The employment context, the tertiary education system and the loan scheme have all changed since then.

The 2006 leavers entered tertiary education before the implementation of a set of moves designed to lift the quality and relevance of lower level tertiary qualifications that have resulted in a shift towards higher-value tertiary education, with the proportion of borrowers who take higher level qualifications rising steadily.  There was a decline of enrolments in low level certificates of 31 percent between 2005 and 2010.  

Changes in the loan scheme made in Budgets 2010-2012 – such as the freezing of the repayment threshold and the increase in the repayment obligation – are increasing repayment rates, leading to a reduction in forecasts of repayment times of more than a year.

At the same time, changes in the education system, such as Youth Guarantee, Vocational Pathways and greater availability of performance information are lifting the performance of the system.  

The 2006 leavers experienced the first and second years of the increase in youth unemployment – 2008 and 2009.  This resulted in worse employment outcomes for these leavers compared to earlier ones.

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