Interest rate cap on student debt off the table for now
The government had planned to cap interest on student loans at 2.5 per cent, but this has proved more expensive than expected. Education Minister Letschert must now backtrack on that promise.
The Jetten government’s promise to cap interest on student loans at 2.5 per cent has proved more expensive than anticipated. This is due to a rise in long-term interest rates, to which the interest rate on student loans is linked. Education Minister Rianne Letschert (D66) wrote this in a letter to the Parliament on Thursday.
When drawing up the scheme, the government had relied on earlier projections that put the long-term interest rate at 2.7 per cent. This meant that the government would only have to cover the 0.2 percentage point difference to maintain the interest rate cap. A budget of €40 million had been set aside for this purpose.
However, the latest projections from the Netherlands Bureau for Economic Policy Analysis (CPB) indicate that the rate will rise to 3.3 per cent, and potentially even higher in the longer term. In that case, €160 million would be needed to fund the interest rate cap, and that money is not available.
In her letter to Parliament, Letschert says she is “disappointed”, but points to the financial market shocks caused by rising geopolitical tensions. Next week, the minister will debate the education budget with MPs.
