Interest on student loans to increase to 2.5 percent

Interest on student loans will be five times higher next year, according to calculations by newspaper Het Financieele Dagblad. The rate will increase from 0.46 to 2.55 percent. Student organisations demand an interest cap.

The new interest rate would mean an annual interest of around 517 euros would have to be paid on the average student debt of 20,300 euros. The government will publish its own calculation later this year.

Five year rate

The rate is linked to the interest on Dutch government loans from October to October. That interest was negative for years, but went up significantly as of mid 2021.

The new interest rate doesn’t apply to everyone yet. The Education Executive Agency (DUO) always fixes the interest rate for five years, so borrowers who are paying off their loan know where they stand. For example, former students who started repaying their debt this year will continue to pay 0.46 percent interest for another four years. Only after that will they have to pay a new interest rate.

The new interest will also apply to students who are currently borrowing and haven’t started repaying. This means their student debts will start increasing more rapidly.

Cap

The Dutch National Students’ Association and the Dutch Student Union say this is the latest in a series of financial blows for students. They are advocating an interest cap. A year ago, Prime Minister Mark Rutte said in the Senate that he wasn’t keen on this idea, but it has since made its way into various election programmes.