Minister of Education Lilja Alfreðsdóttir has published a bill for new laws regarding the Icelandic Student Loan Fund on the government’s Consultation Gateway. The bill suggests implementing a new student grant system parallel to the student loan system and to change the name of the fund to the Icelandic Student Support Fund.
The most notable changes to the current system are that if the bill becomes law, students who finish their degree within a certain amount of time will receive a grant amounting to 30% of the student loan capital, and a grant will also be given to student borrowers supporting children.
Third attempt at changes to student loans
December of last year, the Minister for Education appointed a workgroup to review the loan terms of the Icelandic Student Loan Fund. The bill is based on the group’s suggestions and its goal is to improve Icelandic students’ financial interests.
The bill is the third attempt at changing the student loan system but the current laws have been in effect for almost 30 years. Students have been increasingly requesting an improved student loan system and increased financial support from the government for the past few years.
Social equality fund
Last year, Iceland participated in a comparative survey of European students in 28 states across Europe, Kjarninn reports. The results indicated that Icelandic students, in general, have financial problems and assess their financial state as bad. According to the survey, 34 percent of Icelandic students consider their financial situation either serious or dire. This is somewhat above the European average, which was 26 %.
OECD surveys also show that University students in Iceland are older than in the other Nordic countries. Iceland has the fewest students in the youngest age group, under 24, and most students in the oldest group, 30 years or older.
A report concerning the bill states that it is intended to secure educational equality in Iceland. Its purpose is to decrease the importance of social position and make sure, to the extent that is possible, that everyone has an equal chance and opportunity when it comes to education. Access to education should not be dependent on your geographical location, gender, or financial or social position.
30% reduction of student loan capital
As of now, government grants aren’t available to Icelandic students as they are in the other Nordic countries. The bill suggests that students could earn a grant if they finish their degree within a set timeframe. The grant will amount to 30% of the loan’s capital at the end of the studies. This means that the grants aren’t intended to support the students during the studies as they aren’t given until the studies are over. The bill’s report states that the reason for this is that it is “way more simple and effective” than grant systems such as the Danish one, where grants are paid out during students’ time in school, much like student loans here in Iceland. “The system encourages students to finish their degree on time. It’s necessary to achieve the intended goal, namely to counteract the development that students spend an unnecessary amount of time on their studies.”
The report also states that Icelandic students are more likely to be supporting a family than students in other European countries. According to the aforementioned survey, one-third of Icelandic respondents had one or more children, the highest ratio among the participating countries, and 41.2% of the youngest children were younger than 3 years old.
In light of these circumstances, and to strengthen the Icelandic Student Support Fund as a social equalization fund, it was decided to give out direct grants during studies to students with children. The bill notes that it is suggested that the grants will be tax exempt.
Student loans paid out monthly
Furthermore, it is suggested that it will be possible to pay out student loans month by month instead of at the end of each semester. It is also assumed that the main rule will be that student loans are repaid in monthly instalments and are to be fully repaid by the year the borrower turns 65 years old. Borrowers can choose whether the refund will be stepped or paid back in income-linked instalments if the end of the studies is reached before or in the year they turn 35 years old. Additionally, the bill suggests that by the end of their studies, the student can choose whether to repay their student loans with an indexed or non-indexed bond.
Finally, the bill will also allow the Minister of Education to allow temporary concessions on student loan repayments for certain academic disciplines or for borrowers living and working in fragile settlements. This is intended to give ministers a chance to respond to lasting shortages of people with a certain education by creating incentives for people to get certain educations and/ or to react to situations where there’s a lack of educated individuals in fragile settlements.