Ministry of Finance attempts to turn the screws even tighter on student financial aid

On Friday, the social media was buzzing about the package of employment measures proposed by the Ministry of Finance, designed to increase the employment level by about 60,000 people. Changes to study benefits would account for around 5,000 of these people.



Ministry of Finance’s employment package proposals related to student financial aid.

In the past, decisions on student benefits have been guided by the objective of speeding up graduation and extending working lives. The proposals now being made shift the focus towards increasing the overall employment rate. Raising income thresholds would increase work during studies while, at the other end of the process, the aim is to speed up degree completion by restricting eligibility for student financial aid.

This begs the question, at whose expense will the changes be made?

An average of 5% of university students receiving student financial aid reach the end of the support period before graduating with a bachelor’s degree 1). For such students, the current requirements set for the maximum support period are already too strict. Losing eligibility for the primary benefit, i.e. student financial aid, means either an increase in the use of social assistance, or seeking income from work, redirecting students’ efforts from their core activity, studying. The Ministry of Finance expects its proposed tightening of eligibility for student financial aid to speed up graduation, but at the same time they are restricting financial aid and redirecting students’ focus from their studies.

In turn, reducing the period of study during which someone is eligible for student loan compensation would represent a cut in income for students dependent on loans, dressed up as an employment measure. This may well mean that some students are able to graduate in five instead of five years and a half, but it will also incentivize rushing through the final courses rather than focusing on studying. In addition, it does not support the objective of internationalizing students. The increase in student loan compensation expenditure would certainly fall, due to the reduction in the number of recipients.

Raising income thresholds would reduce needs assessment for student financial aid and thereby improve incentives to work. While this fits in with the cross-party consensus in parliament, the problem lies in mixed signals for students: they are being encouraged to graduate quickly, but raising the income threshold would incentivize them to work more instead of focusing on their studies. It would increase the gap between the two inconsistent goals, but also give students greater scope to choose their own path.

What did the proposal miss? In the run-up to the elections, four out of the five current government parties proposed increases in student financial aid from EUR 82 to EUR 101. The Government decided not to implement this when negotiating the Government Program. However, the objective remains relevant and is worth revisiting:

Raising social security to an adequate level is purely a matter of fairness, but there are also grounds for examining the issue from the employment perspective. If a measure is needed to counterbalance the raising of the income threshold, which is likely to slow down studies 2), wouldn’t raising the level of student social security seem a natural step to take? An increase in the study grant from EUR 252 to EUR 352 per month would significantly improve the livelihood of full-time students, thereby reducing the need to work during studies. Parliament’s information services would probably be willing to quantify this change in terms of its employment impact (ping MPs).

Ministers are right to say that reconciling work and study is currently subject to contradictory pressures (Andersson, Yle, August 14, 2020), and that a student’s job is to study (Ohisalo, Iltalehti August 17, 2020). This conflict is the result of the study benefits policy of the 2010s, when the terms for granting benefits were repeatedly tightened and student financial aid was rebalanced towards loans. When students’ primary work is studying, adequate social security is required in order to guarantee degree completion. Student loans are currently being taken out in order to avoid going hungry, because primary social security is insufficient to cover basic needs.

Development of study benefits must focus on full-time students, who would be best served by the government parties’ goal of increasing the study grant. If reforms are made with the employment rate in mind, they should not be made at the expense of this group.

Jani Sillanpää

Social Policy Advisor

 


1) Kela statistics
2) Eurostudent VI

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