For years, borrowing was free for students: DUO did not charge interest. But since 2023, global interest rates have risen, and DUO’s rates have followed suit. Next year, interest on student debt will be 2.33 percent.

Part of the House of Representatives is unhappy with this and wants to know what it would cost to charge no interest at all, or to introduce a cap of, for example, 2.5 percent.

The math

Zero percent interest on student debt would cost the government 660 million euros per year, while a maximum rate of 2.5 percent would amount to 40 million euros per year, the outgoing cabinet replies to written questions on the issue.

Civil servants explain their calculations as follows. The government borrows money on the global capital market and is expected to pay an average interest rate of 2.7 percent. If the rate for (former) students is set at zero, the government would have to absorb those interest costs itself.

Moreover—and this is also factored into the calculations—it would then become attractive for students to borrow the maximum amount. They could put the money into a savings account and collect interest themselves. Or invest it.

At a DUO interest rate of 2.5 percent, students are unlikely to engage in such strategies, civil servants believe. That is why this interest cap would be less expensive for the treasury, costing just 40 million euros per year.

Parties

It is not known which party raised the question about interest rates. It appears in a series of “factual questions” about the cabinet’s autumn budget update, which lists windfalls and setbacks in this calendar year’s budget. Factual questions never mention party names.

Partij voor de Dieren and SP want to set the interest rate to zero. D66, DENK, and Volt want this only for those who missed out on the basic student grant (students of the so-called bad-luck generation). The rest should pay no more than 2.5 percent, these parties argue.

Whether this will actually happen remains to be seen, now that D66 is negotiating with CDA and VVD on forming a new cabinet. Those two parties are not in favor.

This article was translated using AI-assisted tools and reviewed by an editor