Mid-career job seekers warned to think twice before taking out new student loans

The Retirement Commissioner is urging people facing redundancy in the middle of their careers to think carefully before taking out new student loans to retrain, given the risk they could still be paying them off when they retire.

Government figures show thousands of Kiwis past pension age are still paying off their student loans: in 2023, nearly 22,000 student loan borrowers were aged 65 or over.

Retirement Commissioner Jane Wrightson says although this only represents 2.5 percent of current pensioners, the number could get higher in future.

"We know that the future life of pensioners and retirees is going to be tougher in the next 20 years," she told AM co-host Michael O'Keeffe. "They're going to go into retirement possibly with a mortgage, possibly with unpaid education debt - they may not've got on the housing ladder."

Wrightson says some people have student loans when they reach pension age because they've decided to study for fun. But those thinking about retraining because they've been forced into a career change later in life need to do some "brutal" financial planning before going into debt.

"If you're doing an unspecified degree in your mid-40s without a clear purpose, I'd say that's worth a little bit of concentration."

Wrightson says people need to familiarise themselves with interest and repayment rules.

"If you're still paying your student loan [at pension age] what you may not know is that the minimum repayment requirements kick in, which they don't beforehand. So you're going to get X percent deducted off your pension to repay your loan."

Wrightson's advice is for people to start thinking "in a disciplined way" in their 40s about what they want their later years to look like, and to seek help from budgeting and financial mentoring services if they find themselves in crippling hardship.