Student loan borrowing jumps 12% as more New Zealanders turn to study

Student loan borrowing rose sharply in the first three months of 2026, with 126,696 people drawing down from the scheme between January and March — a 12 percent increase on the same period in 2025. The total amount borrowed reached $1.145 billion, up 19 percent or $184 million, according to an Education Ministry report to Tertiary Education Minister Penny Simmonds (RNZ).

The increase was broad-based across all three things students can borrow for. The number borrowing for fees rose 13 percent, while those borrowing for course-related costs and living costs were up 11 and 10 percent respectively. In dollar terms, fees borrowing increased 20 percent or $162 million, living costs borrowing jumped 19 percent, and course-related costs borrowing rose 11 percent.

The Education Ministry report put the continued rise in borrower numbers down to the state of the economy and the slowing labour market. It noted that the increase began during the April to June 2024 quarter, reversing a previous long-term trend of declining borrower numbers.

This pattern — people turning to study when jobs are harder to find — is what typically happens during an economic downturn. What stands out here is the speed of it. Double-digit increases across both borrower numbers and dollar amounts within a single quarter suggest the labour market shift is feeding quickly into tertiary demand.

The total number of New Zealand-based student loan borrowers edged up by 0.8 percent, from 512,381 in March 2025 to 516,586 in March 2026 (IRD). That figure captures the overall pool of people with active loans, whereas the first-quarter numbers reflect new borrowing during the period.

Student allowances also rose. The report said 37,500 people received allowances in the first quarter, eight percent more than a year earlier. Allowances are means-tested payments that don't have to be paid back, unlike loans.

On the arrears side, the number of borrowers with overdue payments dropped four percent compared with the same time last year. Three-quarters of those in arrears were overseas-based borrowers. As at 31 March, the total overdue student loan amount stood at $2.7 billion. Over 46 percent of that — $1.2 billion — was penalties and interest, of which $1.1 billion was owed by overseas-based borrowers.

The interest rate applied to overseas-based student loan borrowers increased to 5.6 percent, up from 4.9 percent and from 3.3 percent in the prior year (interest.co.nz). Because interest on overdue loans compounds — meaning interest is charged on top of already-accrued interest — successive rate hikes on an already large overseas arrears total are worth keeping an eye on, particularly given that penalties and interest now account for nearly half of all overdue debt.

The broader policy settings around student support continue to shift. On 1 April 2026, student support rates increased under the Annual General Adjustment, with income and asset limits for some forms of support also changing (StudyLink). Budget 2026 allocated $24.5 million over four years to lift tuition and training subsidies by 2 percent for foundation education from 1 January (TEC).

The question for the sector is whether the current surge in borrowing reflects a cyclical response to labour market conditions — the kind that eases when jobs come back — or a more lasting shift in tertiary participation. The ministry's own reporting frames it as economically driven, which suggests borrower numbers could ease if the labour market recovers. But with overseas arrears continuing to grow and the interest rate on those loans now well above recent levels, the long-term cost of the scheme will remain a fiscal consideration for whichever government is in office.