Parents are allowed to help their children purchase a house. So why can’t they extend the same generosity when it comes to repaying a student loan? That was the question posed by opposition parties CDA and D66.
Starting 1 January 2017 parents can donate a tax-free gift of up to €100,000 to their children for purchasing a house or repaying a mortgage loan, but not for repaying a student loan.
“Due to the loan system in higher education, young adults have to wait a long time before they can consider buying their own home, and in the first years following their studies they are burdened with repaying an enormous student loan,” commented the CDA in questions submitted to the cabinet. These are debts young people owe to the government, the party reasons, so the Christian Democrats feel it would benefit the government to have “a facility that encourages parents or other philanthropists to assist students in repaying an enormous debt burden”.
The ‘other philanthropists’ could be family members, an aunt, a neighbour, or even friends. Starting 1 January 2017 they can donate €100,000 tax-free, as long as the money is used for a house. The funds can also be used to pay for a renovation.
Just like the CDA, D66 also expressed reservations with regard to the narrow definition of how the gift may be utilised. Parents can donate a tax-free gift of only €52,752 to their child to pay for the child’s studies. D66 wanted to know whether the cabinet could raise that amount to €100,000 as well. They also asked why only parents are permitted to donate money for a study while anyone is allowed to give money for purchasing a house. And why does this lower exemption only apply to a new study? Why can’t it be used to repay a student loan?
The cabinet has yet to reply to these written questions. The expanded exemption criterion for gifts was also available last year. At that time banks experienced a peak in their mortgage loan repayments.