About the new Icelandic Student Loan Fund: A letter from the loan fund officer of the Student Council of the University of Iceland
Photo: Sara Þöll Finnbogadóttir
Translation: Victoria Bakshina
On June 9th, 2020 a new law was approved in Parliament, which abolishes the existence of a, some say ancient, organisation.The Loan Fund of Icelandic students merely existed, with just one paper, few words on a rostrum and one signature. Since, the Icelandic Student Loan Fund has risen from the ashes of its predecessor, with the new goal: to ensure an opportunity to study to those eligible by law, regardless of their economic and social status, by providing students financial assistance in the form of student loans and grants. Now, over a year from the enactment of the law, it's appropriate to look back and ask oneself, whether this Student Loan Fund is fulfilling its purpose, or, whether the organization has simply changed its name.
A grant instead of a loan
What grabs the attention of those interested in the Icelandic student loan system is, of course, the term "grant". This is an immediate strategic shift from the previous student loan organization, from the status of student “loan” to student “grant” However, in my opinion, a student “grant” is a positive development, underlining a stronger vision and stimulating debate on the student loan system. The idea of the Icelandic Student Loan Fund as a student grant, rather than a loan, brings us closer to the standards found in other Nordic countries, that we constantly compare ourselves to. There one thinks about education as an investment of the state into their students, rather than a purchase of financial support for studies by these same students. But how is the grant initiative of the Icelandic Student Loan Fund implemented? These conditions can be found in the allocation rules of the fund.
In the current rules it is stated that if a student completes their studies within the scheduled time, they are entitled to a grant amounting to a 30% reduction in the principal amount of the loan, along with the inflation compensation on the date the note payable is delivered to a debt collector Meaning, that if a student completes their studies within the scheduled time, they have a right to deduct 30% from their student debt by the end of the studies. This is certainly a progressive step in the Icelandic Student Loan Fund, however it is important to note that the interest rate cap was elevated from the fixed 1% to 4% for indexed loans and 9% for non-indexed loans. For the borrower this means that it is more expensive to take (or rather, to buy) a loan with a higher interest rate.
The other large change from the former loan fund is a child maintenance grant. The borrowers with one or more dependents are entitled to a cost-of-living allowance. This is vital for student parents. However, the Student Council has pointed out in its demands that the child maintenance grant is only accessible to those parents that take a loan from the fund. It is such that the parents who pursue studies are subjected to further payments, which childless students don't need to pay. Therefore, it is now possible for student parents to receive the above-mentioned grant without having to take a loan.
The change of resources
That's why it's difficult to argue that the Icelandic Student Loan Fund is worse than the previous Loan Fund of Icelandic students. However, the Icelandic Student Loan Fund is far from being perfect. The necessary changes made to the student loan system were made at the expense of other resources. In the coming term of the newly formed government, a golden opportunity for a comprehensive re-examination of the loan fund emerges. We are certainly going to make a lot of noise in order to continuously improve the student loan system in favor of all students.
Here we’ve looked at two examples of how the new Icelandic Student Loan Fund differs from its predecessor. The loan fund system is complex and often appears to be a sprawl of rules and conditions that may cause inconvenience for both, the prospective and current borrower. That is why I, the loan officer of the Student Council of the University of Iceland, am here. You are always welcome to contact me with your questions and come to me with your doubts. I can't promise to establish a new loan fund organization in the same way as the Parliament did, but I can help you understand and navigate the organization that presently exists.