Cutting interest rates for ‘unlucky’ students? Minister gives three options

All parties except the VVD supported an amendment by Pieter Omtzigt in October to lower the interest rate for students under the loan system, the so-called ‘pechstudenten’ (unlucky students). He wanted to pay for this by reducing the tax benefit for expats, which should raise 183 million euros.

But how do you allocate that money to unlucky students? There are three possibilities, according to outgoing Minister Robbert Dijkgraaf in a letter:

  • A discount on interest rates of, say, 1 per cent. Suppose interest rates rise to 5 per cent, so students of the loan system will pay 4 per cent.
  • An interest rate cap of, say, 2.75 per cent. As long as interest rates are low, unlucky students will then pay the same as others. Should interest rates rise, theirs will remain at most 2.75 per cent.
  • Pay out an annual amount (or deduct it from study debt) to unlucky students who are currently receiving an allowance. That would amount to 65 euros per loan system year, so 260 euros per year for students who missed out on four years of the basic grant.

Overall, Dijkgraaf does not seem very enthusiastic about the adjustment.
Of course, rising interest rates are not nice, but the system is precisely meant for all circumstances, he believes. Moreover, interest rates are lower than in the market and there are safety nets for low-income former students.
Differences in interest rates between former students are also difficult to explain. Should the Lower House choose to adopt these, there should be further investigation ‘into its legal tenability, in the light of the principle of equal treatment’, Dijkgraaf noted.

In addition, the question is whether the 183 million euros will indeed come from expats, as Omtzigt envisages. The scaling down of their tax benefit will harm the Dutch economy, a majority in the Senate believes. They ask the cabinet to come up with an alternative proposal. (HOP, BB)

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