Interest on student loans won't decrease in coming years, if at all

The interest rate on student loans will not decrease in the coming years, if it happens at all. The Tweede Kamer, the lower house of the Dutch parliament, has missed the deadline set by the Ministry of Education to achieve an interest rate reduction before 2027. Moreover, there are now doubts in parliament whether an interest rate reduction is the right way to compensate former students who fell under the loan system, the Telegraaf reported.

Shortly before the elections, a majority in the old Tweede Kamer demanded that the interest rates on student loans be reduced. NSC leader Pieter Omtzigt proposed that the government pay for that measure by cutting the 30 percent tax benefit for expats, and a parliamentary majority supported the motion. Now that international companies are threatening to leave the Netherlands, the Cabinet is doubting that tax cut. The NSC now also has doubts about cutting interest rates on student loans, according to the newspaper.

In January, Education Minister Robbert Dijkgraaf sent the Tweede Kamer a list of options to compensate students who fell under the loan system. The government could reduce interest rates slightly across the board, implement an interest rate ceiling, or introduce an annual allowance for affected students. Any of these measures will take time to implement. Adjusting the interest rate on student loans requires an amendment to the reimbursement rules and, therefore, a change in the law.

“We previously indicated that we needed to know by the end of February 2024 at the latest which option the Kamer will choose in order to arrive at a measure that can be implemented in 2026 at the earliest. That deadline has now passed,” a spokesperson for Minister Dijkgraaf told De Telegraaf. “As previously noted, the initiative lies with the Kamer. We will have to wait and see what the Kamer comes up with.”

The question now is whether the Kamer will suggest an interest rate cut at all. Omtzigt initiated the interest rate cut, but his NSC would now rather look at increasing the once-off compensation for the group that fell under the loan system, NSC MP Rosanne Hertzberger told the newspaper. Dijkgraaf mentioned this option in a footnote of his letter as a “theoretical possibility.” However, he stressed that the Ministry does not have the money for it, and the Council of State has legal reservations.

“Depending on a proposal from the Kamer, we will have to see when implementation is feasible,” a Ministry spokesperson told the Telegraaf. They reiterated that adjusting interest rates is a complicated and lengthy process. It seems unlikely that people with student debt will get relief before 2027, if at all, the newspaper said.