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Finland should raise financial aid students' income limits by 50%, report says

Raising financial aid students' income limits by nearly 50 percent could reap the state almost six million euros a year, says a research group.

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File photo. Image: AOP

A report by the Labour Institute for Economic Research said that raising income limits of students who receive financial aid could reap the state an additional 5.9 million euros a year, in part due to increased income tax revenues.

The income limits refer to the maximum earnings that financial aid-receiving students can earn without losing their study allowances - and without forcing students to pay back aid if they earn too much.

Currently students receiving financial aid are limited to earning a maximum of 11,973 euros a year. Raising that limit to 50 percent would enable students to earn up to 18 thousand euros annually, which would lead to more cash in state coffers, according to the researchers.

However, the institute did not recommend Finland eliminate the income levels entirely, saying it would lead to enabling well-to-do students to access financial aid funds which are meant to be used by people who need them.

The report said the current income limitations prevent students from earning as much as they would like, saying that the current policy's ill effects can be seen in a growing income gap.

The non-profit submitted the report to the Ministry for European Affairs, Culture and Sports on Thursday. Minister Sampo Terho called it an "excellent proposal."

"Previous reports have said that it would be prohibitively expensive to raise the income levels, but this report states that instead, doing so would create large tax revenues," Terho said.

Foot in door of working life

The minister also said the report's findings look good in the long-term, as well. He said it's important for people to get into the workforce after their studies are complete, and working while still at school often helps doing so.

"This would be an excellent refresh, because it is important to encourage young people to start working early. Student and working life should not be separated entities, but rather closer together," Terho said.

The institute's proposes raising the income level limits for students who receive financial aid nine months of the year from around 12,000 euros to 18,000 per year.

According to the researchers, the 50 percent boost would also increase income tax revenue and transfer payments to the state.

Under the current system, if a student who receives financial aid earns more than the 11,973 euros a year, a portion of the aid must be paid back. Under the institute's proposal students would merely pay higher tax rates when as they earn more.

The report, however, does not address how the suggested income limit hike might impact the length of time students spend finishing up their degrees. But Terho said that previous studies on the matter did not find working while studying affects the time it takes for students to graduate.

"A reasonable amount of work while studying would not adversely affect the pace of young people's studies. Active young people receive their degrees within set times, regardless of whether they work at the same time," Terho said.

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