In the context of the overall reform of the student financial aid system, the National Union of University Students in Finland (SYL) is proposing ways to reform the system. The current student loan compensation system compensates students for their debt burden provided that they graduate within a deadline. If the student graduates in time, they will be credited for part of the loan debt they have accumulated during their studies.

The amount of the compensation is limited to a maximum of €400 per month of support used, which means that the amount of debt taken into account for the student loan compensation for a 300-credit degree is €18,000. In such a case, the maximum amount of student loan compensation the student could receive is €6,200. The average student loan taken out in the course of studying for a master’s degree is around €22,400, meaning that current debt levels are above the maximum level that can be taken into account for student loan compensation. It should also be noted that interest accrued on the debt is not compensated.

Although it does help to alleviate the deep indebtedness of students, the current model of student loan compensation does not support livelihoods while studying. SYL believes that the student loan compensation system should be developed in such a way that the compensation is an incentive regardless of unexpected life circumstances. In addition, it must prevent students from getting deeper into debt.

Introduction of annual student loan compensation

SYL also proposes the introduction of an annual student loan compensation system based on students’ progress in their studies. For higher education students who have completed a certain number of study credits, student loan compensation is granted at the end of the academic year for the amount of the student loan taken out up to that point.

The annual student loan compensation model allows students to plan their studies more easily than under the current model, which requires planning several years of studies at once in order to qualify for student loan compensation. This prevents unexpected changes in life circumstances, such as illness, from affecting the student loan compensation.

Annual student loan compensation could also serve as a better incentive. A change of field or a delay in studies for a couple of years would not lead to the loss of the full student loan compensation, as it currently does; instead, it would provide an incentive to try again the following year to reach the study credit target.

Annual student loan compensation would make student loans a safer option than at present. A first-year student loan is the most expensive for students, as the interest accrued is added to the student loan. This capitalised interest also accrues further interest in the future.

Correction of the problems related to student loan compensation deadlines

There are several shortcomings in the way student loan compensation periods are calculated. These deadline-related problems involve situations where a student falls ill, undertakes military or non-military service, has a position of trust in a student union, student body or national unions, or is undertaking a student exchange. At worst, any of these factors can cause students to lose out on the loan compensation for reasons beyond their control. This goes against the purpose of the system.

SYL believes that the aforementioned shortcomings must be corrected and changes must be made to the deadline and starting date of the student loan compensation system.

Further information:

Aino Halinen
Board member (social policy)
044 906 5007
aino.halinen@syl.fi

Sonja Naalisvaara
Social Policy Adviser (student finances, housing)
sonja.naalisvaara@syl.fi