Total study debt climbs to over €28 billion; Student loan interest rate rising next year

The total study debts of current and former students in the Netherlands (1.6 million people) were 28.2 billion euros at the start of 2023, Statistics Netherlands (CBS) calculated. According to the statistics office, that is an increase of 1.7 billion euros compared to the previous year. The interest paid on study debts will rise from 0.46 percent to 2.56 percent on 1 January 2024, the highest level in 14 years.

The total student debt increased every year since the student loan system was introduced. The government abolished that system this academic year, reintroducing the basic study grant for students in higher education.

Over 330,000 people had a student debt of over 30,000 euros at the start of this year. Over 120,000 people owed more than 50,000 euros, and 1,800 people even owed more than 100,000 euros.

People between the ages of 25 and 30, most of whom have finished studying and are already making repayments, had the largest student debts at an average of 22,900 euros each.

On Monday, the Education Executive Agency (DUO) announced that the interest rate on student loans will rise to 2.56 percent. The fivefold increase is due to the higher interest rate that the government itself has to pay to borrow money. The interest on student loans is linked to the interest on government bonds with a term of five years.

The interest rate hike will not affect everyone. The interest rate for former students is always fixed for five years. Those who were lucky with the timing can, therefore, benefit from the low interest rate of just under 0.5 percent for years to come. But those who have completed their studies in the past year will face the higher interest rate from January. The same applies to former students whose fixed-interest period expires at the end of this year.

Students and former students will see the new percentage that applies to them on My DUO by no later than October 18. DUO already sent an announcement by email.

Currently, almost all students can take 35 years to repay their student debts. The group that studied before 2015 must do so in 15 years. They have their own interest rate, which will increase from 1.78 to 2.95 percent from January 1.

Education Minister Robbert Dijkgraaf can “well imagine” that students are concerned about the higher interest rate. He said that DUO will adjust the interest that graduates have to pay on their student loans to their personal situation. “For example, if you have little income, you will also pay little back each month.” Moreover, the Minister believes that reintroducing the basic grant and temporary allowances for inflation and energy costs will provide “financial peace” for some students.

According to the student union ISO, students face one financial blow after another. “It’s like a game of financial roulette: what interest rate will the wheel land on this year?” said chairman Demi Janssen. “We, therefore, call on politicians to set an interest rate ceiling. That prevents sky-high interest rates and offers students more security.”

The interest on student loans stood at 0 percent for six years. Last year, interest rates rose slightly for the first time in years.