


The student debt crisis makes everyone suffer – dispatches from the debt pit
BLOGI
In this blog post, Member of HYY’s Board Tommi Mäki discusses students’ untenable situation in the face of problems with subsistence and getting into debt.
What do students need to be able to learn at the University? High-quality teaching, obviously. Facilities are also needed to make it possible to even participate in lectures and teaching. Encouragement from fellow students would not hurt either. That is not quite enough, though. In addition to the above, students also need a roof over their head, nutritious food to keep them satiated, medication if needed and opportunities to rest and pursue hobbies outside of studies and work. However, we are currently in a situation where the majority of students face a struggle to simply get by. Housing and living costs have increased while the benefits students get for their living costs have decreased at the same time.
According to the ‘Student’s City 2023’ study published last year, nearly seven out of ten students were worried over getting by financially due to rising living costs. One third of the respondents had already had to refrain from buying food or medicine due to not having enough money, almost half had started working more alongside their studies and one fifth had taken out a larger amount of student loan than before.
We students have repeatedly expressed our worries over our distress and insufficient income to the parties making decisions in society. The answer we have been given has been rather indifferent: ‘But student aid is now higher than ever before!’ This is, of course, entirely factual; it is based on the emphasis on loans in student aid having been increased over the years.
However, loans are not a form of social security. Loans are loans: they must be paid back with interest. Student benefits, loan excluded, were at their highest level in 1992 when the study grant was 462 euros per month. This is almost double the current amount. After taking inflation and the depreciation of the value of money into account, we can see a steady decrease in the level of study grant.
Amid enormously risen interest costs, being forced to get into debt to cover one’s living expenses is a cold comfort. Students are the only group of people whose social security is, to a significant extent, built on loans. In current social discussion, living on credit is often presented as the greatest challenge of our time, a key problem we need to solve. Why does this suddenly not apply to students? Why do people want to drive students ever deeper into the debt pit?
The practically non-existent income and loan-based social security students get during their studies is justified by claiming that education is an individual’s investment in their own future, and society should not have to pay for it. This argument feels completely hollow when even the state believes that education and increasing the level of education have significant benefits for society. Why else would we be spending year after year seeking the philosopher’s stone that makes the level of education in Finland rise again?
A high level of education among the population has a positive effect on the national economy. Why, then, do we want to pile the costs for this on individuals, when the entire society enjoys the fruits of it. Should we not rather be viewing higher education as an investment in us and in Finland?
Student loans are not cheap or safe loans. Covering their daily living costs, groceries and rent, with borrowed money, students can only guess at the true cost. The student loan stock has already risen to over 6 billion euros, and loan amounts will continue to grow in the future. If a fresher starting their studies this autumn takes out the full amount of student loan, they will have well over 38,000 euros of debt by the time they graduate, not to mention the interest. An increasing number of graduates have to apply for interest assistance from Kela because their income is not high enough to cover loan repayments and interest payments. Students’ rising loan amounts also have an effect on public finances.
Graduates are not in an equal position when it comes to loan repayments. The salary level in all lines of work does not facilitate the smooth repayment of the student loan within a few years. Scarcity is often thought of as a temporary stage in life that students have to endure during their studies. However, this is not always necessarily the case anymore. Paying back the student loan may take decades and impact decisions on starting a family, for instance.
What is the solution then? Student loans should be developed to better correspond to the increasingly large debt and interest burden. The amount of student loan compensation must be increased to reduce the amount of debt students are getting into. An annual student loan compensation should also be introduced. This way, delays in studies caused by difficult situations in life would not prevent students from getting at least a partial compensation.
We also need an interest rate cap on student loans. It is unreasonable to force students to get into debt without offering protection against the fluctuation of interest rates. The terms of interest assistance should also be relaxed by raising the income limits, for instance, to ensure that high interest rates do not ruin graduates’ finances.
The cuts aimed at students under current policies are forcing people into impossible situations. Burned-out students and recent graduates buried under unreasonable strain without the ability to pay back their student loans cannot be a sustainable goal.To protect Finland’s future, we students need sufficient resources to focus on what we should be doing: studying and learning. We need peace to study!
Solutions:
- The terms of interest assistance are relaxed.
- An interest rate cap is set on student loans.
- The maximum amount of student loan compensation is raised.
- An annual student loan compensation is introduced.
Tommi Mäki
Member of the Board