Students concerned about the effect of interest rate hikes on student loans
Students are increasingly concerned about an increase in the interest rate on their student loans, according to student organization ISO. President Lisanne de Roos called the rise in interest rates yet another blow to students.
Interest is set annually for five years for the group of students graduating that year, ISO said. “The interest rate is determined on the basis of the average effective yield of a Dutch five-year government bond over the previous academic year. In recent years the interest rate was negative, which meant that students paid 0% interest on their student loan debt.”
But the current economic situation and rising inflation could push interest on student debt to more than 1.5% in coming years, according to the ISO. “After the empty promise not to count student debt for a mortgage application and the meager compensation for generating the loan system, it now appears that students may have to pay hundreds of euros a year in interest. By the time the students have paid off all of their student debt, it will be thousands of euros. It really is a lot of money, accompanied by a lot of worries,” said De Roos.
The ISO also pointed to other factors that are costing students more, such as rising rent and energy prices, rising grocery costs, and planned tuition increases for college. 2023-2024 academic year due to inflation. “The increase in amounts causes financial worries among students,” said De Roos.
A spokesman for Minister Robbert Dijkgraaf for Education, Culture and Science said he understood students’ concerns about rising costs. However, it’s important to realize that the recent period of historically low interest rates was truly unique, the spokesperson said. “Furthermore, special social repayment conditions still apply to student debt. Those who earn little pay nothing, and beyond that, what you reimburse remains dependent on your income. And if the interest rate goes back up at the end of this year, nothing will change for many people paying off short-term student debt. Interest on student debt in this repayment phase is still fixed for a period of five years. After the study, the percentage of this time remains fixed for five years.