In the present situation, former Dutch students are able to conceal their student loans when applying for a mortgage. Vereniging Eigen Huis (VEH) seeks to change this situation in the very short term.
VEH wants Bureau Kredietregistratie, an institute that registers debts centrally, to be granted access to information on student loans. Bureau Kredietregistratie is where banks check whether mortgage candidates have outstanding debts and whether they are likely to default on their mortgage payments at the first hint of financial adversity.
Back in 2012, when the political parties in office, VVD and PvdA, were introducing reforms to the student loan system, they prevented Bureau Kredietregistratie from being granted access to student loan information. They felt such access was unnecessary. After all, they said, student loans were a different kettle of fish from regular loans.
Banks are unable to check student loans
Student loans are now outside the banks’ scope. Officially, people applying for a mortgage must declare their student loans themselves, and they can get into trouble if they fail to do so, but banks are unable to verify this information. Vereniging Eigen Huis is not the first party to sound the alarm regarding this situation; the National Institute for Family Finance Information (Nibud) has done the same in the past.
VEH has also warned that according to the small print in Nationale Hypotheek Garantie contracts, student loans cannot be taken into consideration in determining the amount of the mortgage to which former students are entitled if students take a year off from studying and temporarily quit repaying their debt to DUO.
‘We were warned by several of our members that mortgage advisers are telling students to try this trick,’ a VEH spokesman stated. ‘Of course, things like that shouldn’t happen. It will only cause banks to grant irresponsibly generous mortgages. Banks should be able to look into former students’ student loan situations, especially now that the amounts students are borrowing are increasing.’
Not the same weight as regular loans
Banks calculate the amount mortgage candidates are allowed to borrow on the basis of their current monthly expenses. Generally, student loans do not carry the same weight as regular loans, with banks assuming that former students must pay off 0.45 percent of their outstanding student loans.
In other words, if a former student has an outstanding student loan debt of 10,000 euro, banks will estimate that he or she will have to repay DUO 45 euro a month. This is considerably less than the €200 a month the same student would have to earmark for repaying his or her car loan (i.e., 2 percent of the amount of the loan).
Student loans and mortgages are a politically sensitive subject. Recently it was established that banks, in making their debt calculations, always use the full amount of a former student’s student loan, even in cases where students have already repaid part of their debts. The Lower House has ordered the banks to stop doing so.
Due to the favourable terms of repayment granted under the new student loan system, student loans are considered less of a negative factor than they used to. As a result, former students with significant outstanding debts are now able to get more generous mortgages than they used to under the former student grant system.