Wealthier students receive most government funding – Study

The think tank DEA this month published a report showing that students from well-off families receive most of the benefits from Denmark’s generous student funding scheme, rather than young people from lower income groups. While student financing has contributed to equality and social mobility, barriers to the poor remain.

The study, by DEA Chief Economist Kristian Thor Jakobsen, is titled Resource-Strong Youth Receive Most SU. SU is the acronym for the student funding scheme.

“It can be concluded that the SU has not become the social battering ram that it originally was thought of as being,” wrote the weekly newspaper Weekendavisen on 13 August.

“The SU, which now is costing the government DKK21 billion [US$3.3 billion] a year, is in reality more a help-yourself-table for the young from well-off families while those from poorer homes have to do with the crumbs.”

The study was made possible by Danish population registries, which are among the best in the world. In addition to demographic data they contain a range of information that can be used to monitor the social welfare system.

For this study, data were collected on people born in Denmark in 1973, 1978, 1983 and 1988, who were living in Denmark on their 18th birthday, and the student funding they received between their 18th and 30th birthdays. This data was matched with the data on the incomes of their parents when they were 18 years old.

Danish SU the best in the world

The Danish student financing system was introduced in the early 1970s and has been reformed several times. Yearly expenditure by the government doubled from 2000 to 2020 for several reasons, one being a greater tendency for students to enter higher education.

The basic principles are that all Danish youths have the opportunity to embark on higher education and succeed, and that the SU is sufficient for students not to have to work while studying, which for the other Nordic countries is a must.

The Danish parliament has discussed the SU several times and repeatedly decided that one of its basic objectives is to contribute to social mobility, so that it is not only students from wealthy families that are able to benefit from long-term higher education.

Danish SU is more favourable than student financing in the other Nordic countries, because the size of the yearly support is significantly higher throughout and also because a much higher proportion of SU is given as a grant instead of a loan.

The annual amount of support to students in 2020 was DKK64,400 (US$10,200) after taxes – about twice the amount that Norwegian students receive and four times higher than Finnish students receive.

The study also demonstrates that students from homes with the lowest average household income generate the most debt from SU – DKK40,000 (US$6,400) compared to half that amount for students coming from the 10% richest families. But that debt is still far below what Norwegian students accumulate – on average NOK333,000 (US$37,800) in 2018.

University World News asked Jakobsen about the report’s implications. “I believe that it is always important to discuss if and how we can make the Danish educational system better,” he said.

It was important to discuss student financing within a broad perspective of how to overcome the remaining challenges to social mobility. “We know that SU contributes positively to social mobility, helping students from low-income groups to enrol and complete a tertiary education.

“However, as all students receive transfers from the SU, we end up also paying students from high-income groups. One could think that many of them would complete a tertiary education even if, for example, the level of payments was lower,” Jakobsen said.

“And although SU and free education has contributed to equality, it has not yet managed to break down the barriers in the educational system for young people from lower-income groups.”

In 2016 several members of parliament questioned the growing SU expenses and proposed a transfer from the grant system to student loans, as reported by University World News.

And in 2020 the finance committee in parliament asked the Minister of Finance Nicolai Wammen to calculate the government savings arising from transferring the SU from a grant to a loan at the masters level. This was calculated to be DKK2.4 billion (US$380 million).

The main findings

The main findings from the study are:

Young people who have grown up with parents with relatively high incomes receive the most SU between the ages of 18 and 30.

Among young people born in 1978, those whose parents earned in the 10% highest income group received 16% of total SU paid out, while young people whose parents earned in the lowest 10% of incomes received 7% of the total SU. Thus, the children of top-income parents received 2.2 times more SU than those of the low-income group. This proportion fell to 1.5 times more for those born in 1988.

Until they were 21 years old, the young from the low-income group born in 1988 received the most SU. But from then on, SU to a greater degree was awarded to young people from resource-strong homes because of their head start on higher education.

Focusing on people who have earned a masters degree when they pass 35 years of age, SU has to a significantly higher degree been paid out to students from the top-income group. From the 1973 cohort, this group received 25% of SU paid out to the total cohort; this was down to 20% for the 1988 cohort. Students from the lowest-income parents received only 4% of total SU paid out to this group.

The young from low-income parents have most SU debt on their 30th birthday. Those with a bachelor or masters degree have on average DKK44,000 (US$7,000) in SU loans, while young people from high-income families have on average DKK20,000 in debts to SU.

On average, young people from low-income homes with a bachelor or masters degree had received DKK487,000 (US$77,000) from SU, both as a loan and a grant, when they entered their 30th year. The SU loan was equal to 9% of the support received.

For those from well-off families, the loan portion was on average only 5% of the total DKK417,000 they had received. Students from the low-income group who take a masters degree receive the most SU and are also those who accumulate the highest SU debt.

Some responses

Head of the education and research division of the Danish Chamber of Commerce, Mads Eriksen, told University World News that the chamber finds the DEA study exciting.

“We think that grants should be changed into loans. SU today goes mostly to youths from well-off homes.” Money saved could be used at the elementary school level and to prepare people under 25 years of age for vocational training or to vocational training.

Camilla Gregersen – chair of the Danish Association of Masters and PhDs (DM) and deputy chair of Akademikerne, the Danish Confederation of Professional Associations, which has approximately 450,000 members – commented to University World News: “In my opinion there is no doubt that Danish SU plays a significant role in our society, not least from a democratic point of view.

“A number of prominent scientists analysed a few years ago what the consequences might be if one were to change Danish SU as we know it.” Here is a link to that study.

“They concluded that changes in SU would have consequences for young people’s behaviour when it comes to study admission, educational choices, education completion and dropouts.

“In DM we stand guard on SU. We can’t let short-term savings become a barrier for young people’s access to education, regardless of social background.”

Mike Gudbergsen, president of the National Union of Students in Denmark (DFS), commented to University World News: “As a society, we should strive towards the goal that everyone can take the education they want to regardless of their parents’ social, educational or economic background.

“The findings of the DEA study show that in Denmark we still have work to do if we are to achieve this goal.”

However, he continued: “That we still see a skewed distribution of SU based on the economic background of students should not be held up as a sign of weakness of the Danish SU system, about its ability to help with social mobility.

“We know that SU has a positive effect on social mobility in Denmark, and current problems with regards to further breaking with the issue of social heritage would only worsen if Denmark were to reduce the SU level or reorganise the SU system so that masters level students would have to take an SU loan.”