Work to Study, or Study to Work?

Photo: Student housing in Helsinki.

University students in Finland are demanding more money. In 2017, financial aid was cut to EUR250.28 per month. Today, students are demanding a EUR100 increase in financial aid from the new government that would bring their support to around EUR350 monthly.

Unfortunately for students a rise in financial aid seems doubtful. Earlier this month Interior Minister Maria Ohisalo (Green League) stated on Yle’s 8 minuuttia programme that a hike is unlikely, though that had been one of her party’s main campaign promises during the election earlier this year. The new government has agreed, however, to link the amount of aid to the cost of living. Also more affordable houses and living have been promised to students.

Keeping students happy in a country that faces an aging population may be important, but increasing financial aid would be difficult given an already optimistic government budget.

GoNorth! Outlook
Finnish university students will have to keep up the pressure for the long-term (we mean years) to see their financial aid increased. The current government is unlikely to agree to a direct increase in support …sorry students…

Why might Finnish students turn down work?

This year, Finland’s student financial aid program hits the graceful age of 50. University students don’t pay for education in Finland and receive government financial aid to support themselves. The idea is that young people are enabled to focus on their studies and not have to worry about working at the same time. Therefore, they should be able to graduate faster and become tax payers, which is what Finland needs, especially given the demographic challenges mentioned above.

Here’s the catch: accepting financial aid substantially limits how much a student can earn by working. Yet few companies will hire a graduate with little work experience. Currently, if you study nine months out of the year, and you take out financial aid during those months, you can earn up to EUR11,973 annually.

Summertime blues

The income limit was set because the Finnish state didn’t want wealthy students who were able to independently support themselves also receiving financial aid.

It’s not exactly easy to survive in expensive Finland with only financial aid, especially if you want to enjoy your university years, which every sane person does. What’s tough is that even if students don’t get financial aid for the three summer months (unless they study full-time during the summer), the income they earn from a job during this time is calculated into the whole year’s earnings. A student who succeeds in getting a well-paying summer job and continues part-time work during study time can quite easily go over the earnings limit.

For example, if you make EUR6,000 between June-August, you’ll only be able to earn EUR5,973 the rest of the year. This would mean EUR664 per month. This limit is quite low especially if you, like many students do, work on weekends or nights and earn extra for unusual working hours. For example Sunday work pays double the usual salary.

Tax the students

A January 2019 study from the Labour Institute of Economic Research recommended that the earnings limit be increased to about EUR18,000 per year for students who study nine months out of the year. This would have a positive impact on students’ well-being and increase the government’s net income tax revenue by EUR5.9 million annually, the report found.

At present, the risks of earning too much are real for students. Finland is the only Nordic country that requires students who earn over the limit to pay back the financial aid they received that year in full. That’s right. Go over the limit. Pay it all back.

In comparison, in Finland’s Nordic neighbor Norway, students who earn more than they are allowed only have to pay a greater amount of tax. In Denmark, only the amount earned that’s over the limit for students receiving financial aid has to be paid back.

Finnish social service agency KELA says about one in ten Finnish students ends up exceeding the earnings limit. In fact, the latest statistics show that the number of students who earn too much while receiving financial aid has increased. In 2019, KELA requested 40,000 students to repay financial aid from 2017. This was an increase from 34,800 in 2018 (a payback request from support given in 2016).

Cuts and Loans

Student financial aid without housing support is currently EUR250.28 a month. It used to be EUR336.76* before the previous government (2015-2019) brought it to the cutting board in 2017. Chop.

That government, led by Juha Sipilä of Centre Party (Suomen Keskusta), increased the amount of affordable government backed loans offered to students instead. Now students can take out loans of up to EUR650 per month. On top of that a student can get an up to EUR400 per month housing allowance, depending on how high their rent is and if they live alone or not.

This lower financial aid was put to place in August 2017 and already now it has increased the amount of debt that students take on. According to the Bank of Finland students took out EUR15 million more in loans in January 2019 than they did in the same month a year ago. In total, the amount of loans given to students in January 2019 was EUR285 million. The median interest rate on these loans was 0.48%, according to Bank of Finland data. This is a very low interest rate and some students even use the loan or part of it to invest in different assets. As of August 2014, if a student takes out a loan, 40% of the amount borrowed above EUR2,500 can be ‘forgiven’ (up to EUR6,200) if they complete studies within the amount of time Kela estimates it should take them, becoming an educated, full-time tax payer on schedule.

*For students at university and college level. Lower level students were already receiving only EUR250.28 per month before August 2017.