The Dutch lower house of parliament (Tweede Kamer) is pushing for a reduction in the interest rates on student loans for the so-called “leenstelselgeneratie” – the generation that experienced the student loan system. A proposal by MP Pieter Omtzigt appears poised to secure a majority in favor.
This initiative is being co-sponsored by left-leaning GroenLinks-PvdA, the left-of-center Christian party ChristenUnie, and the Eurofederalist Volt party. Additionally, it is likely to garner support from the far right PVV, center-right CDA, pro-farmers BBB, the Party for the Animals, and nationalist Forum voor Democratie.
Omtzigt’s proposal suggests scaling back the tax benefit for highly-educated expatriates. The funds saved from this adjustment would be channeled to provide relief to the unlucky generation of students. The exact percentage by which interest rates could decrease and when students might see these changes are yet to be determined.
Interest rates on student loans are set to increase fivefold on January 1, going from 0.46 to 2.56 percent. Consequently, students and graduates could face paying thousands of euros more in repayments.
Zero percent ambition
The Liberal democratic party D66 and the Socialist Party are attempting to garner sufficient support for their own proposal to reduce student loan interest rates to zero percent. However, this endeavor appears challenging, and these parties are expected to support Omtzigt’s plan.
A major point of contention is the financing proposed by these parties. They intend to raise the value-added tax (VAT) on ornamental horticulture from 9 percent to 21 percent, aligning it with the standard VAT rate. This change could significantly increase the cost of items like flower bouquets that are currently taxed at the lower rate.
Understanding Omtzigt’s amendment
Pieter Omtzigt aims to amend the law concerning the “30-procentsregeling,” a policy offering a tax break for highly-educated foreign workers to offset their high living costs in the Netherlands. Under the current regulation, such workers are exempt from paying taxes on up to 30 percent of their income for five years.
Omtzigt proposes a gradual reduction of this benefit, commencing on January 1, 2024. According to his plan, the “30-procentsregeling” would apply for a maximum of 20 months, followed by a 20-percent rate for the subsequent 20 months, and ultimately a 10-percent rate for the final 20 months.
Omtzigt has long been critical of this regulation, contending that expatriates, with their tax advantage, can afford higher rents, disrupting housing markets, particularly in cities like Amsterdam. This amendment was also included in the election program of his new party, Nieuw Sociaal Contract.
Omtzigt estimates that the adjustment to the tax benefit would yield nearly €200 million annually. The entirety of this sum would be allocated toward reducing interest rates for students who did not benefit from a basic grant. The basic grant system was eliminated in 2015 and was reinstated starting from the current academic year due to its detrimental effects.
In response to the impending interest rate hike, hundreds of students and graduates demonstrated in The Hague on Wednesday.
Many from the “unlucky generation” carry substantial debts and argue that they are being treated unfairly compared to students who received basic grants.
Advocating for fair student loan terms
FNV Young & United, the youth wing of the Dutch labor union federation, advocates for maintaining a zero percent interest rate on student loans for all students, as they borrowed under the assumption that interest rates would remain at zero percent, according to the union’s spokeswoman Yasmin Ait Abderrahman. “It was not clearly communicated that these rates could increase,” she emphasized.
The reduction in interest rates for the “unlucky generation” is seen by the youth labor union as a first step. “But everyone is affected. Students starting their education now will receive a basic grant, which is great because we fought long and hard to abolish the student loan system. However, that basic grant is still quite low, so it is important for them that the interest rate remains at zero percent.”
If the amendment regarding the expatriate regulation is adopted, it will become part of the Tax Plan for 2024. However, it must still pass in its entirety through the Eerste Kamer (First Chamber).