Livelihood and well-being at stake – how will the position of students deteriorate with government budget proposal?

In recent weeks, university takeovers have put a spotlight on the decisions of the Orpo Government’s first budget session to cut housing allowance and freeze the index of student financial aid. AYY’s Social Policy Specialist Tiina Pajukari explains in her blog post why cuts on students are unsustainable and answers frequently asked questions on discussion boards and comment fields regarding student income.
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The planned cuts will hit students hard. Student benefits are low in comparison with other social security, and half of the financial aid already consists of a loan. Even by taking out a full loan, a student income barely reaches the poverty line – meaning that the income is sufficient for the expenses necessary for living.  

The government is planning to cut housing allowance. Of those receiving the allowance, more than 40% are students. The cut would reduce the monthly housing allowance of a student living alone in Helsinki by €70. In addition, the government is planning to freeze the indexes of both the housing allowance and student financial aid.

In summary, index cuts mean the following; when the cost of living increases, subsidies should increase in the same proportion. The index freeze means that subsidies do not increase, even when prices increase. You are getting less for the same money this year compared with last year. For example, galloping inflation has increased the price of food products by 7% since last year. Next year, student financial aid would have increased by EUR 15 to cover the rise in prices, but this is an increase that the Orpo Government is not willing to make.

Why aren’t you grateful, isn’t student financial aid higher than ever?  

The Orpo Government has responded to proposed cuts with an intention to increase the government guarantee for student loans by EUR 200. In the future, students could therefore take out a loan of EUR 850 instead of EUR 650 for each month of student financial aid. As Yle headlined on 28 Sept 2023, ”student financial aid will soon be higher than ever”. Since the student loan is officially counted as part of student financial aid, this is actually correct.

Student loan is still a loan as much as any other loan. The student loan interest rate is currently an average of three to four per cent, and the loan must be paid back with interest. It is outrageous to say that student financial aid is higher than ever by appealing to the amount of the government guarantee.  

Students are the only group of people in Finland who are expected and encouraged to take out a loan to cover their basic subsistence. Loan-based student financial aid is justified on a statistically higher future income of students. However, the income forecasted by the statistics does not feed anyone today.

According to a student loan calculator, if students have a loan of over ten thousand euro, they must pay back EUR 100–200 per month for a decade at current interest rates. This will inevitably affect the financial opportunities of recently graduated young adults. The first jobs are not stable and high-paid in all sectors.

Student loan compensation is a maximum of EUR 6,200, regardless of whether you have a student loan of EUR 18,000 or EUR 30,000. However, obtaining the compensation requires graduation within the target time. According to a study by Eurostudent (2020), health reasons are the most significant reason for a slow study progress, followed by income difficulties.

Why don’t you go and work if you don’t have enough money?

Students do work. According to the Eurostudent survey (2020), 60% of university students work alongside their studies during the academic term. Students work an average of 14 hours per week.  

An article of the Ministry of Education and Culture (2023) reveals that in 2022, students used more time for working and less time for studying than they did in 2019. In a survey conducted by AYY, HYY and Research Foundation for Studies and Education Otus (2018), 70% of students reported that working slowed down the progress of studies. Graduating in the target time can be difficult if you have to balance the use of time between studies and working.  

The more students work, the less time and energy they have left for studies, which are mostly designed to be full-time. In some fields, strict attendance requirements make it difficult to work, while other students have health challenges limiting the combination of work and studies.

Combining work and studies is stressful. In 2022 student survey of Tekniikan akateemiset TEK, 48% of the respondents said they were constantly worried about their well-being. Presumably, the idea is to turn students into taxpayers who are fit for work and the pillars of our society. If things go on like this, recent graduates’ ability to work may be at stake.  

What does mental health have to do with this?

The weakening of student financial aid over the past decade and the increase in students’ mental health problems, accelerated by the coronavirus pandemic, have now erupted into protests. The latest budgetary decisions were the last straw.

According to Nyyti association, which promotes the mental health of students, more than half of higher education students report that they are very often or fairly often worried or stressed about income difficulties and financial issues. Thus, stress about income is a significant risk factor for the mental well-being of students.  

According to Nyyti, uncertainty about income is linked to a student’s poorer academic performance, physical well-being and social ability to function. On the other hand, mental health issues expose students to financial difficulties.  

The mental health crisis of students and livelihood difficulties cannot be separated.

Students are feeling worse and worse, and mental health disorders have increased prolonged sickness absences among young people almost exponentially over the past ten years. However, the relationship between student income and mental health is not recognized in politics, even though the statistics show a clear link. Perhaps the protests will finally get this message across.

Tiina Pajukari

Policy Specialist: Social Policy and Sustainable Development 

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