Tens of thousands of people who have reached retirement age are still paying off their student loans, government figures show.
Christchurch woman Sarah, who did not want to be identified, has spent much of her adult life paying off student loans.
She initially completed a bachelor's degree in sociology and geography and also has a qualification in events management. She graduated with about $40,000 in debt.
She has since reduced that amount to $5,000, but now faces the prospect of increasing it again so she can retrain as a teacher.
“I find it demoralizing to still have a loan at 40. I feel like I will never get ahead and I have made so many decisions that just didn't lead me to being financially successful.”
Financial mentors say student loan debt can stick with people for a long time.
An Auckland financial mentor said people who had been on low incomes all their lives were sometimes shocked to find their pensions were being cut off to pay back a student loan.
“They wouldn't pay it back with benefits… I don't think people realize that when they retire they have to start paying back their student loans from a pension.
“If I say, 'Look, they just don't have any money,' you're told they have to pay it back someday. I think a lot of people who haven't made a lot of money after college will be quite surprised by that.”
She said half to three-quarters of retirees she dealt with had student loans.
Financial coach Shula Newland said someone with a student loan could also find that income from KiwiSaver and other investments was being used to pay it off.
She said beneficiaries were often encouraged to study as a way of getting off benefits, but could get a loan for a qualification in a field that did not pay well.
It was possible to apply to suspend student loan repayments due to hardship, she said.
Fincap senior policy adviser Jake Lilley said there should be a mechanism for people collecting debt to look at the broader 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 mobility problems due to the poverty that comes from not being able to afford things and ultimately having a poor outcome that comes at a cost. [like] hospital admission… if Studylink's debts mean someone doesn't turn on the heating when they need it.”
Currently, people must pay 12 percent of every dollar earned above $24,128 per year. A single person living alone would receive a pension of just over $31,500 per year.
Government data shows that as of June 30, 2023, there were 21,710 student loan borrowers age 65 and older. Of those, just under 16,600 were based in New Zealand.
Sarah said she was concerned about the prospect of getting a loan that stretched into the future.
“I used to treat 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 opportunity, I have to do that.”