Jonkman finds the difference between the old and new system quite simple. The old system provided students with study financing (popularly referred to as stufi), which also allowed students to borrow an additional amount. The amount borrowed had to be repaid within fifteen years. The key difference with the new system is that the basic grant is no longer a non-repayable grant, but it’s a ‘study advance’, or, in other words, a loan. However, students now have thirty-five years to repay this loan. The new system only applies to students in higher education. Senior secondary vocational education (MBO) students are still eligible to receive the basic grant.
There’s a misconception that the basic grant disappeared because of a lack of funds, says Jonkman. The most important reason is improving quality in education. “If you have a single big lump sum of money, you have to think carefully about how you’ll allocate it. By getting rid of the basic grant, much more money can be spent on improving education.”
Right, so you’ll be repaying your loan when you complete your studies. The amount to be repaid is calculated by DUO and you can also figure it out for yourself using the calculation tool [link] on their website. Jonkman: “The calculation tool doesn’t look at which study programme or which job corresponds to which salary. A doctor will generally earn more than an art history graduate, but the doctor will also pay back more once he or she starts working. At DUO we use calculation models that show how much you can repay. This is done in cooperation with the Tax and Customs Administration; they can see exactly how much is deposited in your account every month.”
“It remains to be seen whether there will be a widening gap between students who have parents who pay for everything and students where that’s not the case. It’s always the student’s choice to take out a loan. Of course that choice is easier for some students than for others, but ultimately, life isn’t always fair. There is an option where you could be eligible for a supplemental grant if your parents are in a certain income bracket and this grant is more than what you got under the old system.”
Lower mortgage loan
One concern that’s on students’ minds is that they’ll be unable to qualify for a mortgage loan due to their student loan debt. This is nonsense, says Jonkman: “It’s always possible to get a mortgage loan if you hold a permanent job. But this loan amount could be quite a bit lower if you have debts. But one perk that ‘new borrowers’ have is that the calculation is made with a lower weighting factor, because you have more time to repay your loan. Since your monthly repayment instalments are often lower, this means you can borrow more for your mortgage.”
How much can you borrow for a mortgage? Here’s an example
According to David Schippers, the maximum amount you can borrow for a mortgage is linked to your debts. Schippers illustrates this using a student, Rosalie, as an example of how the calculation is made. Rosalie has found a job after finishing her studies and earns 40,000 euros gross annually. She accrued a student loan debt of 30,000 euros during her studies. She wants to borrow the maximum amount for her mortgage, which amounts to – calculated using De Hypotheek Adviseur’s official software – 118,000 euros. Without a student loan debt she would have been able to borrow 185,000 euros. But Rosalie has a partner. Her partner also earns around 40,000 euros annually and has a student loan debt of 15,000 euros. Together they’re eligible for a mortgage loan of 350,000 euros.
Additionally, the calculation considers the original debt amount without taking into account extra repayments already made. So if you were to wait around ten years after your graduation and you’ve repaid half of your student loan debt, the calculation is still made using the original outstanding debt. Unless you repay a larger amount of something like five thousand euros in one fell swoop. In that case, the five thousand euros will be deducted from the total debt.
“The housing market is overheated to such a degree that it’s almost impossible for first-time buyers to purchase a home, especially with the average price for a house currently at around 300,000 euros. In addition to the student loan debt that is deducted from the available loan amount, don’t forget the purchasing costs that also have to be paid by the purchaser. This alone means you might have to cough up as much as 20,000 euros.”
As a mortgage lender, you sometimes encounter people who don’t disclose their student loan debt. This, says Schippers, is a very stupid thing to do. “By not disclosing your student loan debt, you’re basically committing fraud. Remember that a mortgage loan is always immediately due and payable. If a bank discovers you lied about your student loan debt, the bank can say it should never have provided a mortgage loan in the first place and demand repayment of the full amount. And you’re left picking up the pieces. Even though a student loan debt isn’t registered with the Credit Registration Office, I’d like to give you a tip: bear in mind that this will change in the future, there’s no escaping it.” Whether that will actually happen is unclear: Jonkman states she hasn’t seen any signs that the Credit Registration Office plans to register student loan debts.
Schippers fears the loan system will create a widening gap between rich and poor. “In practice, parents often help out when it comes to obtaining a mortgage. Sometimes through a guarantee or through ‘family banking’, which uses utilises gift tax. Unfortunately, not every graduate who is a first-time buyer has parents who can just hand over a pile of cash or act as a guarantor for their child’s mortgage. Is that fair? No. But it will always be like this. The gap between rich and poor is a given, no matter how unfair or frustrating it may be.”
“One result of student loan debts combined with an overheated housing market is that the highly educated will force less educated people out of rental homes. As a consequence you’ll see that people who are less well educated will have to live with their parents until they’re thirty as they wait for public sector housing to become available,” predicts Schippers.
In spite of all this, Jonkman doesn’t think that students in general need to be overly concerned about paying back their loans. “This always depends on how much you earn. It’s entirely possible that you were unable to repay your debt after thirty-five years. You still don’t need to be concerned: your debt will be cancelled. If you’re unable to find any kind of job after graduation, then the ability-to-pay principle applies: if your income is lower than the statutory minimum for repayment, then you don’t have to repay your debt. In this case, the repayment term of thirty-five months isn’t extended, it remains unchanged. But each year they’ll reassess your situation to check if you have a job or if you’re receiving benefits.
You also have the ‘wildcard years’: during the years where you’re repaying your loan, you’re entitled to five wildcards. For each wildcard, you don’t have to make any loan payments in that year. You can’t use a wildcard in consecutive years and when used, that year is added to the thirty-five. This could come in handy if you want to take a trip around the world and you have no income for that year.”
Emigrating to escape your debts?
A trip around the world is fine, but leaving for abroad to avoid repaying your loan isn’t. “Emigrating is permitted, but you have to make sure DUO knows your whereabouts,” says Jonkman. “You don’t want to end up detained at an airport or stuck at an embassy because you failed to repay your loan. Aside from that, students don’t have much to worry about. Enjoy your time as a student and think carefully before borrowing money.”