Students at the University of Helsinki. Photo: Emmi Korhonen / Lehtikuva
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Finland’s national social insurance institution Kela paid €112 million to banks in 2024 for unpaid student loans, marking the highest amount on record and continuing a sharp upward trend in recent years.
The figure has risen from €85 million in 2023 and €31 million in 2022. In 2020, the total stood at just under €25 million.
The loans in question are state-guaranteed, meaning that Kela steps in to repay banks when borrowers default.
Students are still liable for repayment to Kela, unless the agency later waives recovery.
Piia Kuusisto, a benefits manager at Kela, said some borrowers appear not to grasp the nature of the commitment. “It seems that people don’t always understand that a student loan is actually a loan. And they’re not prepared for the responsibility that begins when it’s time to start repaying it,” she told Yle.
Kela highlighted that students at vocational institutions make up the largest share of defaults, based on data from 2022 and 2023. Updated statistics have not yet been published.
Student loans in Finland are intended to supplement financial aid and are guaranteed by the state but issued by commercial banks. The total loan stock reached over €6 billion in 2022, with the state’s relative share of risk remaining stable despite the increase in defaults.
Loan guarantee amounts vary: €850 per month for students aged 18 or older in Finland, €400 for secondary-level students under 18, and €1,000 for students studying abroad.
Financial experts and debt counsellors say the rise in unpaid loans reflects broader issues with financial literacy and awareness of repayment obligations.
Liina-Lotta Heinonen from the Guarantee Foundation, a debt advice organisation, said the problem is visible in their work. “We do see them — I have to admit that. These are situations where Kela has paid the guarantee to the bank, and the debt is now in Kela’s recovery process or has been sent to enforcement,” she said.
Kela has the authority to waive repayment demands in certain situations, such as when the debt is small or collection would be unreasonable given the borrower’s financial condition. In 2024, the agency waived €2.6 million worth of repayments under these rules.
The Finnish government stopped checking applicants’ payment default records when issuing loan guarantees in 2017. Responsibility for creditworthiness checks lies with the lending banks.
Low interest rates in recent years and cuts to the study grant had previously encouraged students to take on more debt. But as repayments now fall due, many are struggling to meet the obligations.
Experts have warned that inconsistent practices across institutions and unclear communication around loan terms are contributing to financial stress.
HT
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Source: www.helsinkitimes.fi
