Loans | At the turn of the year, interest rates on student loans skyrocketed – with OP, the interest rate could rise to 1,895 times

Part of those with student debt ran into a drastic interest rate increase on their student loan at the turn of the year.

According to a message seen by Helsingin Sanomat and received by a student debtor, the interest rate on the customer’s loan has risen to 3.791 percent on December 31, in accordance with the terms of the customer’s debt, while the old interest rate was 0.002 percent.

The interest rate therefore rose to 1,895 times in an instant. The skyrocketing rise can be explained by the fact that previously the interest rate was practically non-existent.

The student loan of the person in question was taken from the OP group.

In practice, the example loan has risen by the entire 12-month Euribor rise. More than a year ago on December 30, the annual euribor was -0.498 percent. Exactly one year later, the interest rate was 3.291 percent. The interest rate increased by 3.789 percentage points in a year.

This has also been done in the case of another student loan borrower who took out a loan from OP.

HS asked the OP for a comment on the rate hike.

The OP group commented on the matter by email, where the bank writes that it does not comment on the loans of its individual customers.

Most of the student loans granted by the OP Group are tied to the 12-month Euribor. Euribor-linked loans are taken out the most in August and January, so the interest rate revisions also fall in the same months.

A special feature of the student loan is that the interest on the loan is capitalized, i.e. the interest is added to the principal of the loan, i.e. the loan amount, as long as the borrower is entitled to study support, says OP’s communication.

So the borrower does not have to pay interest to the bank during his studies, but they are added to the student loan to be repaid. The interest is capitalized for the period of the study grant payment and for one more semester after the last study grant month.

A student loan the increase in interest rates is visible to the customer in at least two ways.

The rise in interest rates increases the total loan amount to be paid. In addition, the rise in interest rates becomes relevant when you have to start paying the interest back to the bank – in practice, when a semester has passed since the last withdrawal of the student aid.

The effect of rising interest rates on your own finances depends on how big the student loan is compared to your income.

Finland The Union of Student Unions (SYL) took over at the beginning of September bear on the increase in interest rates on student loans, which it found troubling. At that time, SYL proposed an interest rate cap or a similar interest rate protection for student loans, which would protect students from interest rate risks.

The student loan stock has doubled since the 2017 study aid reform to 5.5 billion euros. According to SYL, the growth of the loan portfolio has accelerated every year.

At the same time, the union said that the vast majority of current university students expect their personal loan amount to be more than 20,000 euros after graduation.