Interest on student loans may rise, rules judge

Because of a rising interest rate on student loans, a former student brought a lawsuit: the government had not properly informed him. But he lost his case.

 

For six years, the interest on student loans was zero per cent. What you borrowed had to be repaid and not a penny more. That changed in 2023 (0.46 per cent) and the year after the interest rose to around 2.5 per cent.

Many students felt caught off guard: they had no idea borrowing could become more expensive. But despite student demonstrations and political outrage, nothing changed: the interest went up.

Trust

Not fair, a former student thought, and he brought a lawsuit against the Ministry of Education. Student finance agency DUO had not provided adequate information, he argued. That harms the principle of legitimate expectations.

In a short ruling from June, made public this week, the judge rejected this argument. The law sets out how the interest on student loans is determined: it is linked to the interest the State itself pays on loans in the capital market. The interest can therefore rise.

The judge also noted that DUO has a calculator on its website that lets you see the effects of rising interest rates. At the current rate, and with a debt of 20,000 euros, you will pay almost 11,800 euros in interest over 35 years.

Warning

Shouldn’t there have been a warning like ‘Be aware, borrowing money costs money’, as is required for other loans? No, the judge found, because a student loan from DUO does not fall under the Financial Supervision Act.

That is also why student loans are not registered with the Credit Registration Office. Unlike a loan for, for example, a car or a house, flexible conditions apply to these loans. Those who do not earn enough have to repay less, and after 35 years the remainder is written off.

Earlier, dozens of students threatened to bring a collective lawsuit. Nothing more has been heard of it.

The interest on student loans was once much higher, namely 11 per cent. For those repaying, DUO fixes the interest rates for five years. So someone who, for example, began repaying in 2022 is still at zero per cent.