Repay the student loan immediately or wait? Students who graduate must start thinking about this. Repaying or not has consequences for the mortgage, among other things.
More study debt in the Netherlands
The number of students with student loans is growing. The average study debt per student also rises. This has everything to do with the new loan system. Since September 2015, students can only receive a student loan in the form of a loan.
The Central Planning Bureau (CPB) expects the average student loan to increase due to the new loan system to 21,000 to 24,000 euros per student. Now this is 19,000 euros.
Spacious conditions for repayment
After the study, the study debt must be repaid to the Education Executive Agency (DUO, formerly IB group). This is possible under broad conditions, including:
- a start-up period of 2 years in which nothing has to be repaid.
- ample maximum repayment time: 35 years in the new loan system compared to 15 years in the old loan system.
- a monthly amount based on income.
- a low interest rate.
Compare these conditions more often with a regular consumer loan.
Pay off your study debt or not?
The broad condition of a student loan can be very welcome. For graduates at the start of their career, the term amount can have a significant impact on the monthly costs. Even if you have one or more more expensive loans (in red, mail order credit or credit card), it has priority to repay them first.
However, if you can miss a monthly amount, it is advisable to repay your study debt extra. At the end of the term you are then the cheapest. At the moment the interest rate is low, but it can rise during the term. A repaid loan is also a worry less.
The mortgage, however, is the most important reason to immediately start repaying a student loan if possible. For many graduates, buying a home is an important step in the future. The higher your study debt, the less mortgage you can get.
Another reason to pay off. In the event of a marriage, both partners become responsible for the study debt.
Do not redeem, but save or invest
Making money with your study debt: that sounds good. Instead of paying off your student loan, you can use money that you have left over each month to save or invest. You may therefore achieve more returns than the student loan costs.
Yet this sounds better than it actually is. With the current low interest rates, the return is limited. When investing, you even have a chance of a negative return, so you get deeper into debt. In addition, you must be strong in your shoes to save monthly and not use the accumulated capital for other things.
If you ever want to take out a mortgage, you must immediately put this plan out of your mind. The return that you may achieve with saving or investing is not equal to the amount that you can borrow less because of a high study debt.