Concerns persist over student loan burden, welfare reforms

University students and stakeholders in Finland remain concerned about proposed government social security reforms that are seen to be shifting the focus of the student support system towards increased borrowing.

An increase to the guarantee amount was announced by the government of Prime Minister Petteri Orpo in November 2023. In addition to increased guarantees for students studying in Finland from €650 (US$712) to €850, it said loan guarantees for students studying abroad would increase from €800 to €1,000. If implemented, this would constitute the second €200 increase since 2017.

Concerns around the increases are compounded by local media reports in November last year, which noted that Finnish students failed to make €72 million worth of student loan repayments in 2023, with the full-year total expected to rise to €80 million – about three to four times higher than the longer-term average.

Upon their announcement, the loan measures, together with plans to freeze student financial aid and housing benefits, form part of the governmental austerity budget for 2024 and were met with protracted protests and sit-ins by students and other stakeholders, mainly centred on the University of Helsinki.

Universities Finland (UNIFI), the cooperative organisation for Finnish universities, has described the government’s plans as they affect students as “problematic”.

“The government's plan to increase the state guarantee for student loans from €650 to €850 may increase students’ disposable income despite the proposed index freezes, but at the same time it increases students’ loan burden, which UNIFI finds problematic,” UNIFI Chair Professor Ilkka Niemelä told University World News this week.

“The cost of living, and especially housing in the capital region is so high that many students are working alongside their studies to cover their living costs. As a result, over the previous few years’ time, the weekly time spent studying has decreased by 6.1 hours, while time spent working has increased by 2.8 hours,” said Niemelä, citing the EUROSTUDENT survey.

“Universities take very seriously the growing concerns of students about their livelihoods, and the impact of financial pressures on their well-being as well as their studies. UNIFI supports the launch of a comprehensive reform of student financial aid as set out in the government programme”, said Niemelä.

Student hardship

According to the student union, Svenska Handelshögskolans Studentkår (SHS), the government proposal to freeze the index for student financial aid, will mean that aid would not be adjusted for inflation and would therefore decrease in the upcoming years.

In addition, cuts to the student housing allowance would mean, according to calculations by the National Union of University Students in Finland (SYL), that a student living alone in Helsinki can expect €70 less in housing allowance in the coming years.

“At the same time as the government wants to cut support, they want to increase the maximum amount of the student loan. If you take out your entire student loan over three years, it will be about 6,000 euros more than before,” the SHS said.

Linnéa Partanen, a member of the board in charge of subsistence at the Student Union of the University of Helsinki (HYY) wrote on HYY’s blog page in October 2023 that the government was forcing students “deeper into debt”.

She described the student protest action, including occupations which took place late last year, as “the students’ cry for help to the government”.

Increasing the emphasis on loans in student aid was likely to increase the number of students who will not be able to pay back their debt and would reduce students’ chances of graduating within the target time while still retaining their ability to work, she argued.

“The cuts proposed by Orpo’s government are a way of shifting the costs of education from society to individuals, which decreases the accessibility of education,” she wrote.

According to YLE reports, citing statistics from Kela, in 2010 the average masters student finished with debts totalling €6,700, but by 2022 that figure had grown to €22,600 per student.

The rise has been less steep among vocational students (those who attend universities of applied sciences), who had debt averaging €9,100 in 2010 and now finish with an average of €17,800.

Speaking to YLE, Joonas Soukkio, chairperson of the National Union of Students in Finnish Universities of Applied Sciences, called on the government to re-think the move to increase the loan guarantee amount.

“We’re very critical about raising the loan amount. People are already struggling to repay their loans and interest costs. Making student financial support even more loan-based isn’t good in this environment,” said Soukkio. “We hope that the government will re-examine once more whether the freezes in student financial aid and cuts in housing allowance are necessary,” Soukkio added.

Lotta Leinonen, the chairperson of the SYL, told YLE that the announced policy measures would likely increase borrowing by students.

“You’re already seeing that the majority of people are taking out student loans to cope with day-to-day life: for food, rent and clothes – the basic necessities you need to live,” she is quoted as saying.

Leinonen said such difficulties can undermine the ability of students to focus on their studies, resulting in fewer students graduating in time.

The government has said the cuts are targeted at segments of the population that, in general, are best equipped to improve their position by finding employment. However, as Soukkio noted: not all students choose to pursue degrees in highly paid fields.

“Wages in social and health care, early-childhood education, social services and culture aren’t high,” he told YLE.

Financial support for learners

According to Eurydice, the European Commission's Education Information Network, student financial aid in Finland consists of a study grant and a student loan (which must be paid back), “the purpose of which is to guarantee subsistence during the period of study”.

It notes that a student’s income “affects the number of months per year for which they can receive financial aid” and that “annual income should not exceed the specified limit”.

It also notes that the “amount of study grant per month is EUR254 and the amount of student loan per month €650 (in 2022 to 2023). It is possible to combine study grants with the student loan”.

According to Eurydice, around 62% of first and second-cycle students received a study grant and 44% took out a student loan in 2021 to 2022.

In addition to study grants and student loans, most students are also entitled to general housing allowance. The amount of the housing allowance depends on the income of all household members and on the housing costs.

Students who take out a student loan and complete the degree within a target time are eligible for student loan compensation. It means that the state pays back part of the student loan, according to the Eurydice site.

Welfare state

Nuutti Ruotsalainen, outgoing student representative of the Student Union of the University of Jyväskylä, told University World News the linking of loans to student income was against the idea of the welfare state.

“The decision to take out a loan, of course, depends on factors such as part-time work during studies or financial support from parents. In my opinion, this is completely the wrong direction.

“These days, students receive a student loan compensation after graduating within a specified time frame. However, the Orpo government does not increase the student loan compensation in the same proportion as it raises the student loan.

“Going into debt because of student loans makes it harder for young people to build wealth and delays milestones like buying their first home. It's unfair that this should be connected to someone's social and economic background. It also goes against the idea of the Nordic welfare state,” he said.

Student protests

Issues of student welfare, as well as concerns about changes to immigration policies affecting international students, were the key drivers behind the protests organised by students at the University of Helsinki which started in September last year.

“The government has planned a series of cuts and changes to the housing benefit that will affect hundreds of thousands of students and other low-income earners. In addition, the government has decided to freeze index increases on a number of benefits – including student grants – for the duration of the election period. If the planned cuts come into force, an independently living adult student will lose on average almost €1,300 during 2027,” noted a student petition calling for support of the students’ occupation.

“The government’s proposed tightening of the procedures for granting work permits, permanent residence and citizenship, combined with increasing racism in society, will have a direct impact on international students.

“They will make it more difficult for students to find a job and build a future in Finland, as well as undermining their well-being, security and capacity to study. Plans to increase tuition fees for non-EU [and] EEA students will further increase the financial and emotional burden, inequality among students, and global injustice,” the petition concluded.