I am all for preventing inequity, but I am not in favour of the CDA’s proposal (links to Dutch content) to ban investing student loans. Their argument may appear logical: it is only the rich students that don’t need their loans to cover their living and studying expenses. So, only the affluent students are able to use their loans to invest. Still, I think a ban is just a drop in an ocean of inequality, if that.
The fact that some students choose to invest their DUO loan, while others don’t, does not necessarily reflect the contents of their wallet or that of their parents. Rather, it reflects the students’ financial knowledge*.
In the Netherlands, access to education is considered ‘the great equaliser’. But, until financial education is included in the curriculum, being highly educated gives few financial benefits. Wages don’t always keep up with inflation, and working for money (taxed in Box 1) is considered fiscally less interesting than having your money work for you (taxed in Box 3).
If you have never learned to invest, you can save all you like, but your wallet will never outgrow that of the investor
However, to benefit, you need to know how the Dutch tax system works and how you can make it work for you. If you have never learned to invest, or even what investing is, you can save all you like, but your wallet will never outgrow that of the investor.
The solution? Include financial education as a mandatory subject in the high school curriculum! Teach every high schooler about saving, budgeting, investing and the tax system so that they all have the same basic financial knowledge. This will likely result in an increase in students investing their loans, but because they all have the same financial knowledge, inequity is reduced.
*It is financially smart to use your student loan to invest. The leverage effect of the debt and the fact that the interest on your loan is much lower than the returns you may get on the stock market. But this is something you must know in order to consider it, as well as having knowledge of investing in order to make sound choices.
Emma Mouthaan (26) is a master’s student of Molecular Nutrition and Toxicology and is also taking a master in Writing at the VU. Emma blogs on studying and finances on the website The Stingy Student. Previously, she wrote about fashion and food.