Finnish university students are running up student-loan debt at an unprecedented pace.
The Bank of Finland on Monday reported that the outstanding student-loan burden has crept up to a historically high level of 2.7 billion euros, marking only the second time the debt burden has breached the two-billion-euro mark.
Markus Aaltonen, an economist at the Bank of Finland, tells in a blog post that the student-loan debt portfolio peaked at 2.1 billion euros in the midst of the recession of the 1990s, an amount that – when converted to today’s money – is slightly larger than the current one. If the loan portfolio continued to grow at the current pace, it would hit three billion euros by the end of 2018 and four billion euros in the early 2020s.
Aaltonen estimates that the primary reason for the mounting student-loan burden is the recent decision to raise the government guarantees for student loans.
The Finnish government introduced changes to the student financial aid system in August. Students in higher education institutions have since then been able to borrow 650 euros – instead of 400 euros – a month in student loan and consequently run up more than 30,000 euros in debt before completing their studies.
“The previous time the government guarantees were raised, the pace picked up notably also in the months following the raise. As this raise is considerably bigger than the one before, the growth may pick up pace in the future,” predicts Aaltonen.
The Bank of Finland revealed that students in higher education institutions took out a total of 143 million euros in student loans in August – more than two times as much as in August, 2016.
Aleksi Teivainen – HT
Photo: Markku Ulander – Lehtikuva
Source: Uusi Suomi