Amazement at DUO about the commotion regarding student loans: 'A loan is never free, so this one isn't either.'

Lawsuit against Dutch State over Lack of Active Information on Loan Consequences and Risks

Algemeen Dagblad (AD), October 11, 2023. Sebastiaan Quekel

The legal advice firm Legal Advice Wanted is taking the Dutch government to court because it allegedly failed to inform students adequately and actively about the interest rate on student loans. “We have strong doubts whether the state has fulfilled its duty of care,” says the firm. The Dutch Education Executive Agency (DUO) is surprised by the assumption of free lending. “We did not shout in your face: ‘know what you borrow,’ but a loan is never free, so this one isn’t either,” DUO states.

When the loan system started in 2015, students were promised to borrow ‘for free,’ meaning at a zero percent interest rate. The situation is completely different now. The interest rate that (former) students have to pay on their student loans will increase explosively next year, from 0.46 percent to 2.56 percent, a quintupling. Some students will pay hundreds of euros more per year as a result. Unions react with disbelief. “Students see it as a pure dirty trick that they change the rules afterwards,” says Yasmin Ait Abderrahman, chair of FNV Young & United. “This is yet another stab in the back for the unlucky generation that has already had to endure so much.”

The interest on student loans is linked to the interest on Dutch government bonds with a five-year term. That is stated in the law, and legally there is little that can be done about it, according to FNV. However, legal experts do see opportunities. Legal Advice Wanted, a consultancy that previously represented 2,500 students in a lawsuit concerning the energy allowance for students, sees indications that the state has failed in providing information about student loans.

This is because credit providers such as banks must adhere to very strict rules in the Netherlands. This leads to a strengthened duty of care, and this stipulates, among other things, that they must inform their customers about the consequences and risks of a loan in a compulsory and timely manner. This is to prevent them from burdening their customers with excessive debts.

“If you see what banks have to do nowadays, that really goes very far. It would be strange if this duty of care did not apply to the government; after all, DUO provides credit in the form of a student loan to hundreds of thousands of students,” says Robin Bosch, founder of Legal Advice Wanted. “We believe that we can argue well in a lawsuit that this duty of care also applies to the state.”

‘No need to fear a loan’

According to Bosch, the state has suggested for years that the interest rate would remain at zero percent. Former education minister Ingrid van Engelshoven (D66) said several times in the House of Representatives that there was no need to fear borrowing and that students could repay under social conditions. The slogan ‘Watch out! Borrowing money costs money,’ which must be used in all credit advertising, was reportedly nowhere to be found, according to the unions. “We advised DUO to do this, but they found it unnecessary. You see what is happening now,” says Ait Abderrahman. Student organizations confirm that many students are surprised by the news. It feels for them like another stab in the back, partly because of the ’empty promises’ about not counting the student loan for a mortgage application and the meager compensation for the loan system generation.

Legal Advice Wanted sees plenty of opportunities all in all. In other lawsuits about climate and the environment, judges did not hesitate to point out the state’s duty of care, Bosch notes. “That’s why we see opportunities.” DUO says it never promised ‘free lending.’ “It was actually unique that the interest rate was 0 percent,” says spokesperson Tea Jonkman. She understands that the impression of advantageous lending was created. “Probably, the 0 percent interest rate has led to habituation,” says the spokesperson. That’s why it’s a big shock for (former) students that the interest is suddenly rising significantly. “The assumption of free lending surprised us. We didn’t shout in your face: ‘know what you borrow,’ but a loan is never free, so this one isn’t either.”

According to Emma Mouthaan of the financial advice platform Skere Student, DUO has indeed fallen short in terms of information. “It’s actually bizarre that you can take out such a high loan at the age of 18 without being able to see what the interest rate will do in the future,” she says. She refers to an Instagram post in which DUO communicated with confetti that the interest rate would remain at 0 percent for another year. Mouthaan: “Credit providers have to meet a lot of conditions, think: ‘borrowing money costs money.’ why is DUO exempt from that?”

Protest

Students do not plan to just accept it. The Dutch National Student Union (LSVb) is holding a protest in front of the House of Representatives in two weeks against the significant interest rate increase. The union foresees ‘a devastating effect on both current students and former students’ if the interest rate increase goes ahead. During the protest on October 25, the LSVb will argue ‘for stopping the interest rate increase and more compensation for students.’ Especially now that it is election time, the union wants to hear from political parties ‘what their answer is to the concerns of students.’