Student loan drawdown rises by €20m in Aug

New student loan drawdowns on August totalled EUR 196 million, an increase of EUR 20 million on the previous August, according to the Bank of Finland.

The average interest rate on the new student loans was at a record low (0.10%).

The central government guarantee makes student loans a low risk for the banks, which is also reflected in the small margins on the loans.

In addition to the bank margin, the interest level is also influenced by the reference rate applied to the loans.

Of the student loans drawn down in August, 95% were Euribor-linked1 and their average interest rate was 0.06%.

The average interest rate on new student loans linked to the banks’ own reference rates was much higher (0.84%).

As in the previous year, the summer months of 2021 saw a higher than normal level of student loan drawdowns.

The months of June and July saw drawdowns totalling EUR 84 million, which was almost as much as in the same period of 2020, but 64% more than in June–July 2019.

As a result of the large amounts drawn down, the stock of student loans for the first time exceeded EUR 5 billion, to stand at EUR 5.1 billion in August.

The pace of growth in the stock of student loans was still rapid (13.4%), although the pace of the upward trend has been slowing since 2018.

The volume of student loans has been increased by the larger loan tranches that flowed from the student financial aid reform of 2017 and by an increased number of borrowers.

The low interest rates have also increased the popularity of student loans. According to Kela’s statistics the amount paid in student loan compensation has grown in recent years, which for its part has served to slightly slow growth in the stock of student loans.

The average interest rate on the stock of student loans has been declining since the beginning of 2012, and the same trend has continued during the past year.

At the same time, the share of Euribor-linked loans has grown significantly. In August, the average interest rate on the stock of student loans was 0.29%.

Euribor-linked loans accounted for 83% of the stock, which is 36 percentage points more than at the end of 2011. The average interest rate on the stock of non-Euribor-linked student loans was 0.87% at the end of August.