by Inja van Soest
At the beginning of October, the Dutch government announced their decision to raise student loan interest rates to their highest level in 14 years. This announcement ignited controversy and many debates. From January 1, 2024, student loan interest rates are set to surge from 0.46 per cent to 2.56 per cent, as reported by the Dienst University Onderwijs (DUO), the government body responsible for student financial aid.
The sudden and significant increase in interest rates has left many current and former students stumbling, with widespread disagreement over the reasons behind this unexpected move. While some argue that the growth is a necessary adjustment, others contend it is a breach of trust, further compounding the financial burdens faced by students.
The Impact on Students
In response to this increase, students have voiced their frustration and disillusionment with protests, online discussions, and their professors. Many believe they are being unfairly targeted, especially considering that the government has recently eliminated student debt for new students. More and more students struggle to find affordable housing and pay immense amounts for rooms they are often not allowed to register at. Therefore, they miss out on possible governmental funding such as the reintroduced Basisbeurs, a government grant providing financial assistance to students to cover their educational expenses.
“It’s hard to comprehend why the government would choose to burden those of us who still have debt with this interest rate hike,” says Paul, a former student. The sentiment among these students is that the government has not been transparent about the implications of this increase. Usually, when wanting to loan money, there is a clear indicator to remind people that loaning money costs money. The typical logo is nowhere to be seen when looking for information about Dutch student loans.
Conversely, some argue that the rate hike is reasonable, emphasising that everyone should know that borrowing inherently comes with interest costs. “They knew they were borrowing money, which comes with a price. Some say that students borrowed the money to finance parties and a luxurious lifestyle, while others used it to buy a house. Some say no one should be complaining as loaning money comes with the personal responsibility to be able to pay it back. They further argue that a student who pursues a meaningful and lucrative career can quickly repay their debt within the 15-year timeframe.
Whilst it is true that the student loan agreements depend on and are tied to the government’s borrowing costs, the interest rise has been coming. However, students feel like they have been cheated and are being cornered.
Whilst Education Minister Robbert Dijkgraaf does acknowledge the concerns of students and the public, he assures that the rate adjustment is tailored to each student’s financial circumstances. He highlights that those with low incomes will have lower monthly repayments, aiming to ease the financial burden. Furthermore, Dijkgraaf believes that reintroducing the basic grant (Basisbeurs) and temporary assistance to counteract rising inflation and energy costs will financially relieve many students. However, as mentioned before, many cannot access help due to their living situation not officially registered.
The decision to raise interest rates comes after six years, during which student loan interest rates remained at 0 per cent. This was primarily due to the Dutch government’s ability to borrow funds at favourable rates in the capital market; however, the loan interest had to rise at some point due to rising interest rates.
The Feeling of Broken Promises
Van der Ham, a student herself, expresses profound disillusionment with the government’s actions amid this debate. She recalls that she believed in three critical conditions when she started borrowing. “The first was that your student debt would not affect your ability to secure a mortgage in the future,” van der Ham says in correspondence with NOS. Additionally, it was conveyed that the loan was favourable, with little to no interest.
Lastly, there was the impression that the income generated from the loan system would be reinvested in improving the quality of education. Van der Ham feels that none of these promises have materialised.
A law student, Jim Hiddink, shares similar sentiments, feeling that the situation is unjust. “When you begin borrowing, you agree with the government, but now the entire nature of that agreement is changing. The interest rate remained low, at most 0.5 per cent.”
In a letter sent by the outgoing Minister of Education, Dijkgraaf, to the Dutch Parliament in 2022, it was stated that there was never a promise to maintain a 0 per cent interest rate or that the size of a student’s debt would have no influence on their mortgage application. Previous ministers, including Jet Bussemaker, had, however, stressed that the consequences should remain limited and students should not develop a “fear of borrowing.” Which has now, unfortunately, become a reality for many.