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Student debt doubles in a decade

Nearly half a million people in Finland owe money in state-backed student loans, according to Kela.

The average student loan is about 8,540 euros. Image: Ismo Pekkarinen / AOP

Student debt in Finland has more than doubled over the last 10 years, according to a report by the Social Insurance Institution Kela.

Figures compiled by Kela for the last academic year of 2018-2019 showed that more than 156,000 students took out state-guaranteed student loans — bringing total student debt to 3.4 billion euros this year compared to just 1.4 billion euros in 2008.

The total number of people in debt is now 434,900, according to Kela's calculations, with the average student loan totalling 8,540 euros.

While student loans are rising steadily, Kela also found that the number of study grant recipients has remained relatively unchanged. Study grants are provided by Kela to students at upper secondary and vocational institutions, calculated based on criteria such as the students' age, school and place of residence. In the last academic year, 273,600 students received study grants.

Incentives to borrow

Ilpo Lahtinen, chief coordinator with Kela, says he believes that new rules introduced in 2014 are the most significant factor driving increased borrowing.

This legislation was intended to encourage more university students to graduate on time, and makes students eligible for a discount of 40 percent of their total student debt when they graduate, if the loan exceeds 2,500 euros.

"It is such a good carrot for both quick graduation and student loan use," Lahtinen said. "It would be silly not to use it. We are talking about several thousand euros that you can get as credit."

However, although the compensation policy is leading to an increase in borrowing, its impact on the numbers of students graduating on time is still unclear.

Making ends meet

Titta Hiltunen, executive board member with the National Union of University Students in Finland (SYL), views the recent rise as a "negative thing", and points to an alternative explanation for the doubling of student debt.

"The cuts that the former government made to students’ sustenance are behind this rise in debt," Hiltunen told Yle News. "Students’ financial aid was cut from 337 euros per month to 250 euros per month. At the same time, the amount of debt that can be drawn monthly was expanded from 400 euros to 650 euros."

Therefore, in Hiltunen's opinion, students faced with less financial aid are forced into debt simply in order to make ends meet. This has a subsequent impact on students' present and future welfare.

"It’s bad that young people at the start of their adulthood have to graduate with potentially tens of thousands of debt. It stresses students while they are still studying and might be part of the reason why more and more young people feel anxious," Hiltunen added.