Finland’s social benefits agency Kela said it paid a record 112 million euros to banks last year for unpaid state-guaranteed student loans. The figure has climbed rapidly in recent years, rising from just over 85 million euros in 2023 and around 31 million euros in 2022.
A student loan is a government-guaranteed loan that requires no collateral and must be repaid.
Previous cuts to the study grant and low interest rates encouraged students to take out loans, some of which have gone unpaid. According to Kela, a lack of financial literacy may be one reason for the unpaid loans.
"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," said Kela Benefits Manager Piia Kuusisto.
According to Kela’s data from 2022 and 2023, students in vocational institutions account for the majority of unpaid student loans. More recent statistics have not been released.
The total amount of student loans issued by banks rose to over 6 billion euros two years ago, meaning the relative share of government guarantees has remained unchanged.
In Finland, the loan guarantee amount this year is 850 euros per month for students aged 18 or older, 400 euros per month for secondary education students under 18, and 1,000 euros per month for students studying abroad.
Waived loans
In certain situations, Kela may waive the collection of a student loan guarantee and any accrued interest. This is possible if the amount to be collected is small or if, considering the borrower’s financial situation, it is not reasonable to continue collection. This was the most common reason for waiving collection last year.
Waiving is also permitted if continuing the collection would incur disproportionate costs relative to the amount owed.
In 2024, Kela waived the collection of guarantee receivables totalling 2.6 million euros based on all of the above grounds.
However, the challenges caused by student loans are also apparent at the Guarantee Foundation, a national social welfare organisation that offers debt counselling and other financial support services.
“Of course, 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,” said Liina-Lotta Heinonen, the foundation’s chat and online counselling expert.
Since August 2017, Kela has not examined applicants’ payment defaults when granting student loan guarantees. However, banks are required to assess the applicant’s creditworthiness.
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