Today is the day that many students and recent graduates pay the interest on their student loans. Interest on a loan that they were forced to take out to cover everyday costs.
In the early 2010s, the average loan amount for a new master’s degree graduate was EUR 8,000, while in 2024 it was already EUR 24,700. The changes made during the current government term are not even reflected in this growth, as student financial aid has become even more loan-based in recent years. The state guarantee for student loans has been raised at the same time as index increases for student financial aid have been frozen, the housing allowance has been cut and the student housing supplement introduced. In the future, the loan amounts of recent graduates will therefore increase to EUR 30,000–40,000.
Young adults are being encouraged to apply for higher education in increasing numbers. At the same time, students are the only group that Finnish society expects to take on debt in order to cope with everyday expenses. The reference budgets for students published by Kela make it very clear that living on study grants and the housing supplement for students is not possible. For a student living in the Helsinki Metropolitan Area, the study grant and housing supplement do not even cover the rent, let alone other necessities such as food, medicines or a telephone subscription. The situation is no better in other areas, as the benefits do not cover all mandatory expenses outside the Helsinki area.
How does this affect the opportunities for young Finns to get an education? According to the Youth Barometer published in the spring, approximately 80% of young people want to attend a higher education institution, but being forced to take on debt while studying may scare young people – especially those coming from a lower socio-economic background. Although higher education is always worthwhile, the current difficult employment situation may also cause students to doubt their ability to repay the loan in the future.
This matter primarily affects the lives of current and future student generations. However, the increase in student loan amounts is also expensive for the government. A total of EUR 24.9 million in student loans were transferred to the state for payment in 2020, which means that the expenditure related to guarantee liability already exceeded EUR 100 million last year.
The overall reform of student financial aid developed during Orpo’s government term was expected to ease the financial difficulties of students. The Government Programme stated that the main objective of the reform of student financial aid was to enable full-time studies. From the student perspective, this was a welcome step. However, the Government proposal for a new Student Financial Aid Act speaks volumes about the only way full-time studies can be an option for students: by taking out a loan.
The student loan could also have been developed in a way that better supports loan security and students with a debt burden. Several options were presented to the working group that prepared the reform. SYL’s proposals concerning annual student loan compensation and interest rate protection for student loans would have made the loan-based system more encouraging and brought relief to interest payment dates. Raising the earnings limits for interest allowance would have also helped low-income student borrowers. However, these proposals were not implemented, and now the measures to improve loan security are weak. The Government proposal focused on student loan compensation – but only by further targeting it at those who do well in their studies.
What kind of overall reform does student financial aid really need? Since the current loan-based system has a negative impact on both young people and government finances, the solution is very simple: dismantle the loan-based system by increasing the level of study grants. At the same time, the level of both the study grant and the housing supplement should be secured with index increases. The process of linking the housing supplement to the index should already begin in conjunction with the current overall reform of student financial aid.
