All you need to know about student debt

Illustraties: Bewerking: HOP.

Student debt? I already have enough stress!

Recently, 24-year-old Ylke van der Zwet saw someone on TV winning 10,000 euros in the lottery. “I thought: 'wow, that’s a hell of a lot of money! But if I were to win an amount like that, I would still have tens of thousands of euros in student debt'. Only then did it occur to me how high my debt is. I think that many students don’t realise it yet, but later on, it is really set to become a mental burden.”

Van der Zwet is still studying. She already owes nearly 40,000 euros and expects her debt to eventually rise to around 60,000 euros. In 2016, she embarked on a Bachelor’s programme in Astronomy in Leiden. Today, she is pursuing a two-year Master’s programme in Communication Design for Innovation. But she has been struggling with burnout syndrome for the past eighteen months, which means she is way behind with her studies.

“I felt pressured to perform and do extracurricular activities”, she says. Ylke is a member of the Young Socialists socialists group within the political party PvdA. She also served as an "ambassador" for her study programme. “I had little time to relax other than when I was playing korfball, but I stopped doing that when Covid came along… And then I was burned out.”

She managed to pick herself up, but things went wrong again around a month ago, when she took a position on a small committee, which required her to commit eight hours a week. “That was something I didn’t have on my CV yet”, the student justifies. Ylke estimates she is now functioning at around 20 percent.

As for her financial situation, she says it is "not too bad". Her parents are paying for her tuition fees and she lived with them for the first few years. She also borrows 750 euros per month, from which she pays 430 euros in rent (“I am living very cheaply”). The rest is spent on groceries, clothing, personal care, and “building up a bit of a financial buffer”. She rarely goes for a drink in a café. She has a national museum pass to attend exhibitions and a Cineville pass that enables her to go to the movies whenever she wants.

“Now I’m worried that a basic student grant is going to be introduced and I won’t be entitled to it because I have been studying for too long.” She hopes that at least there will be decent compensation for those who missed out on the grant. “10,000 euros would make a huge difference.”

That's right: 10,000 euros, exactly as much as the lottery winner got. Ylke calculates that's the amount she would have gotten if the basic student grant was still around. Now she thinks about the future with a bit of trepidation, as she fears that her current debt will keep her from buying a house.

100.000 euros of debt!

The highest amount owed by a student in the Netherlands is 199,410 euros and 17 cents, according to a document shared by the Education Executive Agency (Dutch acronym: DUO) with higher education press agency HOP. But big sums like that are an exception, stresses DUO.

DUO also sent HO P a "snapshot" of student debt in March 2022. The document reveals that some students have been paying back their debt for years, while others have just started doing it. The total number of people involved is 1,560,289, which is 220,000 more than in 2016. Almost half of them owe less than 10,000 euros. In some cases, the amounts are very small: four percent of students in debt owe less than 500 euros.

One in five students (316,000 people), on the other hand, has a debt of more than 30,000 euros, and among that group, the debts vary enormously. More than 100,000 people owe DUO at least 50,000 euros and 1,000 of those have a debt exceeding 100,000 euros.

How do you amass such a large debt? You can borrow more than 500 euros a month and even 900 euros or more if you do not get an additional student grant. The tuition fee loan is now 90 euros (half the tuition fees) and in normal years 180 euros. Let’s say that you borrow 1,000 euros per month. If you do that for seven years – so as to study medicine, with a year’s delay, for example – your loan will reach 84,000 euros.

Neither a borrower, nor a lender be

The abolition of the basic student grant, in 2015, forced students to borrow more money. On average, they borrow 600 euros per month to study at a university, if they borrow at all.

In fact, by no means does everyone go to DUO for a loan. At research universities such as UU, with or without the basic student grant, one in five students does not take a loan.

Large debts are becoming more common among other students. One in four research-oriented higher education students from the first batch had a debt exceeding 40,000 euros five years later. 

The average student debt – not including those without a loan – has risen by around 5,000 euros to more than 24,000 euros. Research-oriented higher education students (29,235 euros) borrow more than those studying at universities of applied sciences (21,637 euros). Those debts can actually be much higher, as some of those people are still studying.

Make repayments 'til I retire!

How long do you have to bear student debt? If you have the cash, you can repay everything in one go – if that suits you. But for how long can you remain in debt? Here are the rules.

You don’t have to pay DUO anything in the first two calendar years after your graduation. So if you graduate today, you only start repaying in 2025. You can spread the repayments over 35 years. In addition, you are allowed to stop the repayments for 60 months (five years in total) if it’s inconvenient at any given moment.

So the maximum period is actually 42 years and a few months. As an example, if you graduate at the age of 24, you can make repayments until you are 66. Only then is the outstanding amount - if there is any - written off. Make repayments till you retire? In principle, yes.

So how much will you pay? At an interest rate of zero percent, it’s simple. If you have 30,000 euros of debt, you divide that figure by 35 times 12 months. So you repay 71.43 euros per month.

But DUO also takes your income into account. In this example, if you earn 40,000 euros gross per year, the monthly repayment is ten euros less. At 30,000 euros you fall below 30 euros per month and at an income of 22,930 euro (a little over 1,900 euros per month), you pay nothing.

If you have a partner, both incomes are included. So you can’t say, what have I got to do with his/her debt? You are partners in the repayments.

I will never get a mortgage!

A commonly-heard complaint is that under the new finance system you will no longer be able to buy a house. Is that right? We asked financial specialist Karin Boog of Vereniging Eigen Huis.

It’s like kicking at an open door: student debts are nothing new. When students were getting a basic student grant, they could take out a loan. The conditions then were less favourable: you had to repay the loan within 15 years, with higher monthly amounts.

How did that affect the mortgage? Under the old system, debts weighed twice as heavily in terms of getting a mortgage. An ‘old’ debt to DUO of 10,000 euros meant a mortgage that was 19,000 euros lower. “It is even tougher with commercial loans”, Boog warns. “For instance, if you borrow 10,000 euros for a car, your maximum mortgage is automatically 50,000 euros lower.”

Under the new loan system (starting in September 2015) you don’t get a basic student grant but you can borrow money at attractive rates: repayments can be spread over 35 years and the monthly repayment is lower. A debt of 10,000 euros means a maximum mortgage that is 10,250 euros lower. That’s almost one for one.

When would you have been better off: at the time of the basic student grant or not? It depends. Do you have a lot of additional debts or few? Under the old system, your debt was higher but under the new system, the conditions are more favourable. There’s a tipping point. If you need to borrow a lot, the new system is more favourable than the old one.

You can make the calculation on the Vereniging Eigen Huis website. As an example, if you lost out on a basic student grant worth 14,000 euros (four years of uitwonendenbeurs [grant for living away from home]) and borrow an extra 17,000 euros, your student debt is 31,000 euros. Your maximum mortgage is then slightly higher than that of a former student with a basic student grant and a loan of only 17,000 euros.

Actually, student debt is a relatively small problem in comparison with the rapid rise in house prices, which is still ongoing. Ten years ago, the average house in the Netherlands cost 227,000 euros. “In the final months of 202, the average house price was more than 438,000 euros and newbuilds are even more expensive”, says Boog.

You have the right to conceal your student debt!

There is a solution: you could conceal your debt. This is because, unlike all other debts, student debts are not disclosed to the Bureau of Credit Registration. The four parties to the loan system, as well as most of the other parties, are against that.

A lender has to take your income into account. If your monthly expenses are too high, you might be unable to pay your mortgage and thereby get into difficulties. Those rules are there to protect you and the lenders check with the Bureau of Credit Registration whether the house buyers are concealing anything.

But you can lie about student debts. “Don’t”, says financial specialist Karin Boog of Eigen Huis. It’s fraud and could get you into all sorts of trouble. In principle, lenders can even demand full immediate repayment if they find out. “Although I have never heard of that happening.”

But in any case, a lender can take a hard line if you get into difficulties. Anyone who conceals student debt cannot count on compassion. The National Mortgage Guarantee scheme (help with payment problems for houses of up to 355,000 euros) would then lapse.

In fact, lenders are increasingly asking their customers to divulge the amount of student debt they owe to DUO. There was an uproar about that in the House of Representatives, but it’s difficult to prevent it.

Compensation for our frustration!

The basic student grant will be reintroduced in September 2023. Education Minister Robbert Dijkgraaf will outline the plan shortly but we already know what it is going to cost: one billion a year. That amount has not been plucked out of the air. According to the Ministry of Education, Culture and Science it is sufficient to pay a grant to students living away from their parents and to students still living with them.

It will in any case be a performance-based grant. In other words, you get the grant as a gift if you graduate; if not, you have to pay it back. That also applies now to the additional student grant. It is intended as a big stick: make sure you get your diploma or your student debt will be higher.

The transition will be an interesting one. Let’s say that you are a first-year student; what will happen in September 2023, when you begin your third year? Will you get student finance for another two years or for four years? Or nothing at all? We'll have to wait and see. The Netherlands Association of Universities of Applied Sciences warns that the vast majority of prospective students will take a gap year so that they can benefit from the new grant from September 2023.

Now students from more recent batches look with dismay at how their predecessors got a grant and how subsequent batches will too, while they remain empty-handed. And to make matters worse, teaching has suffered because of Covid. They would like to get compensation but that is not going to happen. The government is talking only about an ‘allowance’ and has set aside one billion euros for that purpose.

Dijkgraaf has not yet worked out the details, but it will be between 1,000 and 1,500 euros per student. “Students for whom no basic student grant has been available can choose between a discount on their student finance and a study voucher”, the coalition agreement states. But does that apply only to graduates or to everyone with student debt?

According to officials, even the most meagre compensation is likely to cost 1.4 billion euros, 400,000 less than the amount set aside. Student organisations will continue to fight for a better deal and Finance Minister Sigrid Kaag kept the door slightly ajar, so who knows what the future may bring.

The first four batches of students that came under the loan system are already getting a similar allowance: a study voucher for 2,000 euros, which enables them to get extra tuition for five to ten years after they graduate.

Author: Bas Belleman from HOP