Expert group proposes higher student loans, lower grants

The advisory Danish Economic Council has proposed that a greater proportion of student financing be allocated as a loan rather than a grant. The council – popularly called DØRS or the ‘wise men’ – suggested in an economic outlook that this change be at the masters level.

The DØRS report on the SU, the student financing system, concludes that:
  • • Total spending in economic support has risen significantly, both because of an increase in the number of students and the level of support given.

  • • Compared to other Nordic countries, the Danish student funding model is characterised by grants being a major proportion of funding while loans are a minor part.

  • • Total support for higher education in Denmark now exceeds a level that can be justified, taking the effects of increased taxation into consideration. The support level is also probably higher than can be justified by externalities connected to education.

  • • International research and analysis in the report indicates that switching from grants to loans will have a limited impact on admission and study completion levels.

  • • Several arguments indicate that such a change ought to be made at masters level.
Mixed responses

There have been mixed responses to the proposal.

Unsurprisingly, students have objected. Sana Mahin Doost, chair of the National Union of Students in Denmark, told University World News: “We believe it is deeply problematic to reduce or eliminate student grants at masters degree level with the objective of turning them into a loan system.

“We know that this will have a negative social impact, given the fact that students from less privileged social backgrounds are statistically more reluctant to take a loan. This will lead many students from lower socio-economic backgrounds to opt out of taking a masters degree, or to not take an academic education at all.

“These proposals are, in this way, going against equal access to education, as well as social mobility. Higher education should be equally accessible to all students, regardless of their background. We are strongly against any policy that goes against that principle,” Doost said.

Akademikerne – the Danish Confederation of Professional Associations, which represents close to 400,000 members – also strongly criticised the proposal.

“Based on data from Chile, South Africa and Mexico – countries that are geographically far away from Denmark – the wise men try to conclude that the degree to which student financing is given as loans or grants is indifferent.”

Akademikerne found it unwise to draw far-reaching conclusions from such weak background material, and directed the ‘wise men’s’ attention to a 2015 German study by Anna J Kroth.

The German research demonstrated that introducing a moderate user fee of €1,000 (US$1,170) a year led to a significant fall of 6% in applications by students from non-affluent homes, corresponding to a reduction of 38,000 people.

“Denmark is a world champion in social mobility. And that is not something that happened overnight,” said Akademikerne Chair Lasse Qvistgaard.

Decades ago, future-oriented politicians introduced the SU so that all who were qualified had the opportunity to access higher education, regardless of socio-economic background. “This is the ‘societal glue’ binding society together that people abroad envy in us. This we should not relinquish – and it is exactly what the wise men are putting at risk,” Qvistgaard said.

Two days after the DØRS report, Akademikerne published its own study on the correlation between social background and attainment of masters degree studies in Denmark.

“Three out of four masters degree students are from non-academic backgrounds,” the report revealed. “And the tendency is most significant at regional universities. Here the proportion of masters students from non-academic homes is between 81% and 91%.” The Akademikerne report warned that the SU reforms could have “the largest negative effect regionally”.

Not all are opposed

However DEA, the Danish think-tank that engages intensely with higher education, responded positively. DEA Director Stina Vrang Elias told Berlingske Tidende that SU constituted a significant part of government’s higher education expenses and it was worth ascertaining if there was good value for money.

“DEA is of the opinion that it would be better if the investment was channeled towards improving the higher education system.” Indeed, her support for the proposal was conditional on money saved being channeled into higher education to, for example, increase the number of lecturers or strengthen supervision and feedback to students.

The Confederation of Danish Industry, which represents 10,000 companies, also supported the proposal, stating that the grant proportion of student financing was 2.5 times higher today than during the 1970s. Also, since the mid-1970s student numbers had doubled while spending on the SU in 2017, at DKK20 billion (US$3.1 billion), was 14 times higher.

Nevertheless, the confederation recommended that grants-only funding be given during the first three years of university while the last two should be based on favourable SU loans.

Political blocking?

The recommendation of the ‘wise men’ is in line with what has been on the agenda for the current Liberal coalition government for a long time, and such reform is included in the government’s platform.

But a concrete proposal has not yet been sent to the parliament. There is considerable political risk involved in doing so, since different groups in parliament might oppose such reform and voters might punish parties advocating it.

Political commentator Hans Engell told the Danish news agency Ritzau that the electoral contest was simply too close currently for the government to take a chance on SU reform. "Which parties would participate in such a reform?" Engell wondered. It had trouble written all over it.

Higher Education and Science Minister Tommy Ahlers commented that the report delivered “important knowledge” and had found that the effect on recruitment to higher education would be limited.