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Maximum borrowing is maximum life

 

After studying for a year, I took stock with my son. We talked about what went well, what could be better and where I could still support him.

He has taken the first year of his study, has also continued to work and has saved money on his savings account. I’m proud of him.

I continue to find it difficult to borrow as much as possible.

money debt

All my counter-arguments have had no effect. That’s why I asked him to tell his story. Maybe I’ll understand him better then.

As a second-year student, I like to think that I receive free money from the government every month to finance not only my studies, but of course my student life as well. On the twenty-fourth of every month, ‘Ome DUO’ comes along with a suitcase full of money and the message: ‘Maximum borrowing is maximum life’.

My mother, like many other parents, is obviously against this message.

“It should not be a habit to borrow!” – Of course borrowing is not good.

This is mainly due to the bad, piling up effects that we often get alerted about: “Please note! Borrowing money, costs money!”. However, this is not the case with DUO. The interest rate is 0.0%.

“But this interest rate can be changed every 5 years!” – Of course this is possible.

borrow money

With the abolition of student finance, and the rise of the loan system, the government forces students without capital to borrow money. And as a student you have a lot of expenses:

  • rent
  • gas / water / electricity
  • tuition
  • phone subscription
  • beer
  • clothing
  • groceries
  • school stuff
  • beer…

I make these costs regardless of how much I borrow. I save the money that I keep. When the interest rate rises, I can therefore redeem my saved money (+ interest), and I stay with the inevitable problem that I would have had if I would borrow less.

As an example

I need € 500 a month; € 6000, – per year; € 30,000 over a period of 5 years.

  • Option 1
    I borrow € 500 per month.
    Debt after 5 years: € 30,000. Saved: € 0
    * Interest rate of the loan increases from 0.0% to 1.0%! *
    I can not pay anything, because I have not saved any money
    Debt remains € 30,000 + 1.0% interest
  • Option 2
    I borrow € 1000 per month.
    Debt after 5 years: € 60,000. Savings: € 30,000 + 0.5% interest ≈ € 30,400
    * Interest rate of the loan increases from 0.0% to 1.0%! *
    I deduct € 30,400 so my debt decreases (or € 400 free of course is fun too)
    Debt is now € 29,600

“But with a higher debt you get a lower mortgage!” – Of course this is possible.

money debt

But the same applies here too: I will still incur costs, and will therefore have to borrow. Still, I think it’s a weird principle: You have to borrow to get a decent job, but to buy a house after that you should not have borrowed.

In short: I borrow as long as it remains advantageous. I know from myself that I do not spend more money because I borrow more and therefore know that my method works. In addition, I do not assume that the interest rate for the loan will increase extremely.

With my borrowed savings, I have starting capital for my own company – this is of course cheaper than when I have to take out a loan in 5 years. If that plan does not go through, I can of course pay off this money, and I’m still just as bad off as all other students who do not borrow as much as possible.

Still, I would have preferred the old basic grant.

Although it is not my choice, I do understand his considerations. I agreed to sit down again in six months, to talk about his finances.

Do you know the considerations of your child regarding borrowing for the study? How do you handle this?

 

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