Dutch student-loan interest cap would cost at least €160m a year, government says

The Dutch government says a proposed 2.5% cap on interest for student loans would cost at least €160 million a year, four times the €40 million set aside for it, and says the policy carries financial risks. Education minister Letschert plans to discuss the findings and possible alternatives with MPs next week.

The Ministry of Education says the long-term interest rate linked to student loans has risen from 2.7% to 3.3% since the coalition agreement was presented, and could rise further. That would push the cap’s cost higher, it says. The government says at least €120 million more a year would be needed to deliver the measure.

Letschert said she understood the concerns of current and former students about rising interest on their debts, but that the allocated budget was insufficient for a 2.5% cap. In a letter to parliament, she set out the considerations behind that conclusion.

The ministry says the cost would have to be met from its existing budget, creating uncertainty that could lead to cuts in other areas of education or research. It says it has examined alternatives, including a fixed interest discount and a cap that moves with rates, but neither would have a substantial effect for borrowers.

The minister is due to discuss the issue during parliamentary consideration of the education ministry’s budget on 27 and 29 October.