Controversial student loan reform plans published

Danish Prime Minister Helle Thorning-Schmidt has announced eight reforms to the student financial support system. In her weekly press report on Tuesday she said the reforms would save the government DKK2 billion (US$360 million) a year – but that Denmark would still have the world’s most generous student loan scheme.

Students disagreed and announced that demonstrations would be held across Denmark, on 28 February. However, several commentators characterised the reforms to the student financial support system – known as ‘SU’ – as "gentle".

“We are going to establish a reformed SU system so that it better supports our primary objective that more students will complete their education on time,” Thorning-Schmidt stated.

“Of course it will be possible for students to change studies, and not everybody will have to fulfil strict time regulations. But we will have to improve the present situation, where students are 29 years on average when completing a tertiary degree, and where only one in 10 completes within the time requirements for the degree,” Thorning added.

“In the present situation we have to make clear prioritisation and use resources where we will have a major impact, which means that all have to make their contribution to the reform.”

The report on the reforms, Better Through Education – Reform of the SU-system (in Danish) was launched later on Tuesday by Minister of Education Morten Østergaard.

Østergaard is now visiting Danish universities to outline the planned SU reforms. On Monday he visited his alma mater, Aarhus University.

Students met him with masks of his face, thumbs-down signs and accusations of ‘changing coats’ – symbolising the about-turn in the minister's attitudes to the student loan scheme since he entered government.

As recently as December 2011, Østergaard stated: “The SU is a canon success. And in the government agreement [between coalition partners] we have made it crystal clear: we will not cut the SU!”

The reforms

The goal of government’s reform policy is for 95% of young Danes to complete secondary education, 60% tertiary education and 25% a longer tertiary education. Today, entrance to tertiary education is often competitive. Some 84% of students complete their degree but, the report demonstrates, on average students take 6.1 years to finish a five-year degree.

Most students will be moderately affected by the reform. But students below the age of 20 who are living at home will have severe reductions in monthly payments – from DKK2,860 to DKK1,274 p – and there will be a cap on opportunities to select more than one education strand, to five choices against no current limit.

The minister when meeting students in Aarhus argued that there was a "delay culture" at Danish universities, leading to severe delays in study progression. Several of the proposed measures are aimed at reducing delays.

The report also shows that Denmark has the most generous student loan system in the world. At the press conference Østergaard said that no other country came close to the level of student grant and loan support. A comparatively high proportion of student financial aid is given as grants.

In 2009 Denmark spent 0.55% of gross national product (GNP) on the SU, while Finland, Norway and the UK respectively spent 0.34%, 0.27% and 0.043% of GNP. In the UK, the proportion of GNP spent on student aid is thus 13 times lower than in Denmark.

The Danish newspaper Politiken said the minister had no “maneuvering space” and was under instruction from the Ministry of Finance to effect the reforms, which have been strongly endorsed by the OECD

In the OECD Economic Policy Reforms 2013, published a week ago, the Denmark “Country Notes” recommends that a greater proportion of support for students be given as a loan. Among its recommendations were:

“To lower drop-out rates in upper secondary education, improve the early identification of weaker students, develop targeted initiatives towards them and reinforce vocational education. Provide incentives to shorten completion time in tertiary education by moving to a system combining grants and loans”.

The most controversial issue, heatedly discussed when it became clear that the reforms were under way, is the current sixth year opportunity to receive full financial support – known as the ‘goofing around’ year – which exceeds degree time by a year.

This opportunity will not be fully removed, but only students who have delayed the start of their study by less than two years after finishing secondary education – an estimated 70% of the cohort – will be eligible. And it is proposed that the ‘delay period’ be reduced from a year to six months.

Also, the reform proposes that students be automatically enrolled for exams for the courses they follow, and that further financial support be made dependent on whether they sit for the exams.

Students from well-off families will have less SU support if they live at home, regardless of age, and the basic monthly level of support will be reduced for all students living at home. Further, students must be registered for a full-time (60 ECTS) course, and it will be compulsory for students to sit the first scheduled exam (out of three possible attempts).

The report states that universities will have to improve their administrative frameworks, and that in 2020 a 3.7 month reduced delay in the degree completion rate would be a part of the contract between universities and the government.

Also, universities will receive detailed new instructions on how to recognise credits from abroad, so that students are not delayed because of time-consuming recognition procedures.

The minister further said that the government would ease the transfer from a bachelor degree to a masters, and that entrance to masters courses would no longer be conditional on completing a bachelor degree.

At the Aarhus meeting, Østergaard said that “saved money” would be invested in a tax levy package for Danish industry, which would lead to more jobs for young people.

But students immediately told him they would “not support director bonuses with reductions from financial support”. In the report presented on Tuesday, this re-investment programme for Danish industry was downplayed.

Both Thorning-Schmidt and Østergaard emphasised that the proposed reforms comply with the coalition government agreement.