Column Steven: The loan system: the basic grant machine

What does your repayment life look like? Find out using this tool Steven designed.
Steven Snijders

The average student nowadays is more knowledgeable about scabies than student debt. On the one hand due to the contagiousness of the former, and on the other hand, due to the ostrich effect with regard to student debts.

‘This is really stressing me out. Could you please stop talking about it?’ Not every fellow student is open to a discussion about this topic. Perhaps you, as a reader, aren’t either. But hold on, after reading this column, you will know how to generate a basic grant from the loan system. A few factors are relevant. To begin, the total sum of money you have borrowed. Other determining factors are the interest rates, your income and projected income growth, and whether or not you have a partner.

As of 2024, the interest rates will rise to over 2 per cent and are likely to increase further in the future. You are obligated to pay up to four per cent of the part of your income that is higher than the legal minimum wage to DUO. However, the increasing interest rates could cause your debt to increase faster than your repayments cause it to shrink. Any remaining debt after 35 years is forgiven. Another crucial factor is whether or not you have a partner. You are considered partners if you decide to buy a house together (haha, dream on), have a baby, or sign a cohabitation contract. The mandatory repayment sum is then based on your combined income. In other words: it increases substantially.

If you don’t have a partner or if your joint income is low, your total repayment may total a lower sum than the sum you originally borrowed

I made a tool (see below) that lets you see what your repayment plan may look like with just a few mouse clicks. And how this is impacted if you get a partner or if the interest rates increase. If you, and your partner, have a decent income, your student debt will be repaid in full, including interest [1]. But if you do not have a partner, or if your combined income is low, the sum of your repayments may be lower than the sum you originally borrowed.

The pre-2015 basic grant would translate into a gift of €18.000 over the past 5 years [2]. For example, if you borrowed €70.000 and have repaid a total of €52.000 to DUO in the course of 35 years, you will have received €18.000 more than you repaid. Thus, you will have managed to get a full basic grant 35 years after the fact. Will you, as a member of the screwed generation, un-screw yourself? Try the tool and see!

[1] With a 2.5 per cent interest rate and a debt totalling €50.000, you will end up paying a total of €76.000. one-and-a-half times the original loan (based on a combined annual income with an annual 3 per cent increase in wages).  

[2] Reference sum of the former basic grant for a five-year study living away from home. In 2015, the basic grant was 286 euros per month. Corrected for inflation by 2 per cent per annum, this would amount to a total of €18,217 from 2016 to 2021.

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