2 Nov 2023
Many Equip users have told us that they would like to learn more about the financial impact of their student debt. In this blog we will lay out all the relevant details. Recently, the government announced it's going to change the interest rate on student debt. Look at the very bottom of this blog for information about a special webinar Equip is organizing about these changes and what you should do about it.
Many Equip users have told us that they would like to learn more about the financial impact of their student debt. In this blog we will lay out all the relevant details, such as:
Your monthly repayments
Pausing the repayment
Potential impact on your mortgage
As always, if you have any specific questions about student debt for your situation please feel free to reach out to one of Equip's independent financial coaches. Get your free Equip account, sponsored by Rituals!
As with any debt, you need to pay back your student debt at some point. More precisely, you will have to start paying back your student debt after completing your studies. But when exactly do you have to start paying back? From the first January after your graduation you have two years before you have to start paying back your student debt. For example, if you finished your studies in October 2015, your repayments would have started in January 2018. The rules for your specific situation, including pay-back periods (over how much time you can repay your student debt), depend on when you studied. For example, maximum repayment period is either 15 years or 35 years. How many years you are allowed to repay your student debt depends on your education level and the moment in time you started your studies. Check out this website and this website of the Dutch authorities for the specific details and other conditions (for example, the impact of your student public transportation card on your student debt repayment).
It is important to know that the monthly payment you pay on for your student debt can change every five years. This is because the interest rate on your student debt is reset every five years. Your monthly payments consist of the repayment of your student debt plus interest on this debt.
Pausing your monthly repayments
Did you know you can pause your monthly repayments? The Dutch authorities allow you to pause your payments for five years, without requiring any reason. Pausing your monthly repayments can provide temporary relief, for instance when you are having a child or after purchasing a new home. Important to note is that whilst in the short term pausing your payment can seem beneficial, it may also increase the overall cost of your total loan in the long-term, for instance when the interest rate on your debt is rising. Of course, in the end you will still need to repay your student debt. If you might be interested in pausing your debt payments and want to discuss the impact on your personal situation, please feel free to reach out to one of Equip's independent financial coaches. Click here to get your free Equip account now, sponsored by Rituals!
The impact of your student debt on your (future) mortgage
Your student debt can have a substantial impact on the mortgage you can receive for your future house. When you apply for a mortgage, the mortgage provider will examine your available income for potential mortgage payments. Your student debt reduces the amount of income available for potential mortgage payments, which can impact your maximum mortgage capacity. In short, the higher your student debt, the lower the amount of mortgage you can receive.
The impact of your student debt on your potential mortgage capacity can be significant.
In this blog, we have discussed the financial impact of student debt, including monthly repayments, pausing payments, and the potential impact on future mortgages. It’s important to remember that you have two years after graduation to start paying back your student debt, and that the length of your pay-back period and monthly payments depend on when you studied. Also good to know is that you can pause your payments if required. Furthermore, understanding the implications of your student debt is crucial when planning your finances and considering purchasing a home. In short, having a student debt reduces the maximum mortgage you can get.
Ready to get started with optimizing your student debt?
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Click here to get your free Equip account now, sponsored by Rituals!
Equip is organizing a webinar on Thursday, November 23, 2023, from 13:00-13:45, about the upcoming changes to the student loan interest: "Your student debt is about to change - what can you do?". Click here to register for it.