Study progress rates the same with grants and loans

The different student aid schemes in the Nordic countries lead to significant differences in loan-taking behaviour and whether students take on a job, but they make no difference to the rate of study progress or completion of degree, a survey has found.

Although there is no difference in study progress across the four countries, the motivations to avoid delays are different, according to the survey by DEA, an independent Danish think tank based in Copenhagen.

“For instance, Norwegian students are motivated to stay on track with their studies to avoid accumulating too much debt to a much larger extent than Danes,” the survey analysis says.

“Moreover, Swedish and Norwegian students are very unlikely to be motivated to stay on track by fear of running out of student aid. This is not the case for Finns and Danes, who, apart from fearing running out of student aid, are motivated to stay on track to avoid complications in taking courses.”

One important question that the analysis does not answer is whether the differences in student aid schemes lead to differences in terms of equity in enrolment in higher education.

There was no significant difference in the take up of loans and employment rate between students from different parental backgrounds in Denmark, Finland, Norway and Sweden.

The only instance in which the survey found differences between students with different parental backgrounds was in Norway, where students whose parents have attained higher education are slightly more likely to be on time with their studies than students whose parents have no higher education.

The survey was carried out among 1,800 students in Denmark, Norway, Finland and Sweden asking them about student financing, study progress and if they thought they would fulfil the degree requirements on time, if they worked alongside their studies and how much they thought their study loan would be upon graduation.

The study is a DEA contribution to the higher education policy debate in Denmark, where DEA has questioned if there is value for money in having a student financing system that it is costing taxpayers as much as the total other public investments in higher education – about DKK8 billion (US$1.2 billion) each year.

The DEA's stance has drawn criticism from, among others, Akademikerne – the Danish Confederation of Professional Associations – who argued that a reduction in the SU would hit social groups unevenly, and would risk blocking the use of talents in Denmark by producing 5,000 fewer masters degree candidates, as described previously by University World News.

Stina Vrang Elias, CEO of DEA, said: “If the politicians should decide to introduce a more loan based SU-system, it is important to balance the degree of student debt with the private economic gain there is to take a higher education. This is particularly important for university education, which gives access to some of the highest salaries in the Danish workforce.”

Minister of Higher Education and Science Ulla Tørnæs has described the proposal of a partly loan-based SU as "interesting”, and several organisations have supported the proposal.

On 21 June the Copenhagen University Post reported that “if there is going to be a cut in the SU, it will not be with the support of the people". In a new survey by Statistics Denmark asking a sample of Danish citizens aged between 16 and 74 if it is a good idea to remove SU at the masters degree level and substitute it with a loan, only 19.2% said yes, while 79.5% said no and 1.3% did not know.

Organised differently

Higher education in the Nordic countries is mainly funded through public budgets, so there are no tuition fees, and there is access to financial aid to cover living costs. This high level of public investment in higher education is partly made possible by having higher taxes.

However, the student financing system is organised differently in the four countries. The Danish SU awards a significantly higher portion of the total SU as a grant to the student, and hence the total debt accumulated upon graduation is much lower in Denmark compared to Norway. The DEA has argued that a greater part of the Danish student financing system could be converted to loans instead of grants.

The survey was conducted in order to find out how students behave with regard to taking up loans in the four countries and whether students decide to work alongside their studies and if this has an impact on their study progress towards their degrees.

The survey was undertaken in October-November 2015 among 18-30 year old youths who had passed secondary school, producing 1,772 responses equally distributed in the four countries, and was published by DEA in June.

In all four countries, access to student financial aid is universal for nationals.

In Denmark, students have access to both student grants and student loans provided by the government. The structure of student financial aid in Sweden is similar; however, the basic grant is much smaller than in Denmark.

Norwegian students must take out loans if they want to access student financial aid. However, up to 40% of these loans can be forgiven if students successfully complete the coursework for which they received financial aid. This conversion happens once a year.

In Finland, as in Sweden and Denmark, part of student financial aid is given out as grants. Students may in addition decide to take up loans. As in Norway, part of these loans can be converted into grants. However, the conversion condition is the timely completion of the whole degree. Students completing their degree on time can get 40% of the debt exceeding €2,500 (US$2,770) converted into a grant.

The Finnish system is also different in that part of the grant is earmarked for housing expenditure (rent) and therefore the amount of grant for each individual depends partly on their rent expenses.

The maximum grant and loan amounts in 2015 were DKK107,076 (US$16,000) in Denmark; DKK62,910 (US$9,360) in Finland; DKK82,754 (US$12,300) in Norway and DKK78,589 (US$11,690) in Sweden.

The survey casts new light on the degree of student indebtedness (in 2013), which is very different in the four countries.

The percentage of students receiving grants but also taking out a student loan is 37% for Denmark, 42% for Finland, 97% for Norway and 73% for Sweden.

Asked about their current debt level plus expected debt before they graduate, 9% of Norwegian students, 68% of Finnish students, 56% of Danish students and 26% of Swedish students are expecting to owe up to DKK150,000 (US$22,300) upon graduation.

At the other end of the scale 54% of Norwegian students, compared with only 2% of Finnish students, 6% of Danish students, and 32% of Swedish students are expecting to owe more than US$91,000 upon graduation.