Costs of study, student income, and study behaviour in Denmark.

9. Comparisons of students' income and expenditure

9.1. Description of findings of costs and student finance

9.2. Estimate the cash value of the indirect income and expenditure

9.3. Description of the amount of support for students of differing social backgrounds

9.4. General assessment of the effects of the system of study cost and student finance

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9. Comparisons of students' income and expenditure

9.1. Description of findings of costs and student finance

As a definite student budget has not been drawn up we will desist from presenting an overview of costs and student finances as it's validity would be questionable. As stressed in chapter 4 the State Educational Grant and Loan Scheme is not based on a student budget, but is laid down by law, and intended as a substantial basic income as a supplement towards covering the living costs of students.

9.2. Estimate the cash value of the indirect income and expenditure

It is our belief that the cash value from indirect income and expenditure in general , can be estimated only with huge difficulty, and specifically not at all, as the area within a Danish context is too superficially investigated. We may, however, once again emphasise that the State Education Grants and Loans Scheme is the only source of economic support of significance.

9.3. Description of the amount of support for students of differing social backgrounds

As stressed in chapter 4, the Danish support system does not distinguish between students of differing social background in higher education. Any student that meet the conditions described is entitled to receive the state grant (and loan).

9.4. General assessment of the effects of the system of study cost and student finance

9.4.1. Access to higher education

Even though that the State Education Grant and Loan Scheme offers an economic situation that should keep nobody from being unable to study for financial reasons, it is a fact that children of working-class parents still comprise a relatively small number of the students in higher education.

A newly published book (Note: Hansen, E.J., "Perspektiver og begrænsninger i studiet af den sociale rekruttering til uddannelserne"; Socialforskningsinstituttet 1997) points out that while 25 per cent of children of middle (and upper) class parents accomplish a long-term higher education the same is only the case for 5 per cent of the working class children.

In general, however, it should be stressed that whereas 24 per cent of a youth who had reached the age of graduation in 1982 acquired a higher education, 39 per cent did so in 1995.

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9.4.2. Study behaviour and the living conditions during the period of study

In February 1996, The Office of the Auditor General of Denmark submitted a report to Parliament on study completion of a course of study, and the State Grant and Loan Scheme involving students on specific courses at the University of Copenhagen and the University of Aarhus (Rigsrevisionen, 1996). The report was based on data on 2.600 students enrolled in 1985. The purpose was to find out whether students who received the state grant were more successful in completing their course of study than those receiving less financial benefit. The data investigated could confirm that grant-recipients more often completed their course than students who did not receive the grants. Whether the state grant itself had this positive effect, however, is difficult to say, but at least it can be stated that the grant gives students possibilities for spending more time studying, instead of working.

The Copenhagen University survey (see Appendix B) also compared study-behaviour of grant recipients and non-recipient students, and found that students receiving the state grant progress faster than non-recipients. At the same time it seemed that progress improved after the introduction of the 1988/89-reform with its considerable increase in the maximum support amounts and a small reduction in the free amount which laid the ground for the current grant scheme.

Table 20. Study progress among grant recipients enrolled in 1985 and 1990 after 3 years of studying.

Note: The survey dealt with study progress divided into three levels i.e. minimal, medium and optional. To have an optimal study progress the student should, after three years of enrolment, have credit corresponding to 2½-3 years full-time studies. Medium progress implied credits for 1½-2 years, and students with credits below 1½ year were categorised as having a minimal study progress.

Source: "Statens Uddannelsesstøtte - et effektivt uddannelsespolitisk styringsinstrument?", speciale 1997

Table 21. Study progress among non-recipients enrolled in 1985 and 1990 after 3 years of studying.

Source: "Statens Uddannelsesstøtte - et effektivt uddannelsespolitisk styringsinstrument?", speciale 1997

What should be kept in mind, however, is that even though the state grant seems to have a positive effect on study progress, it is primarily the young students who choose to receive the grant, and they tend to be very "effective" students.

Table 22. Year 1985. Study progress among all students at different age groups after 3 years of studying.

Source: "Statens Uddannelsesstøtte - et effektivt uddannelsespolitisk styringsinstrument?", speciale 1997

Table 23. Year 1990. Study progress among all students at different age groups after 3 years of studying.

Source: "Statens Uddannelsesstøtte - et effektivt uddannelsespolitisk styringsinstrument?", speciale 1997

The youngest student more often come directly from senior high school, and are for this reason in the routine with studying. Due to their young age they may in general have less need and can to a higher extent live within the economic limitations of the State Grant and Loan Scheme.

The non-recipients, on the other hand, often have economic demands that exceed the amount of the state grant, especially if they have children. They may be full time employed, or voluntary, or according to circumstances, not in a hurry to graduate within the nominal duration of the course. In table 17 was shown that they usually work more than the grant recipients.

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9.4.3. Effects on the career and living situation after graduation

The only effect of the student finance system after graduation is the necessity of repaying the student loans.

Repayment of state guaranteed bank loans

In the years between 1964 and 1988, the student support was to a large extent offered as state guarantees for student loans by the banks up to a certain annual maximum amount, at interest rates only slightly below commercial level.

As the tendency among students to take up these loans was very high and interest rates in the first half of the 1980s rose sharply, the result was often very large debt. In the mid-1980s about 200.000 debtors had an outstanding debt of approx. DKK 8 billion. The repayment of these loans still weighs heavily on the economy of many debtors, and has for a large number been insurmountable, with default and redemption by the state as a result. At the end of 1996, 36.000 debtors still had to repay a total debt of DKK 2,2 billion to the banks, and 27.000 debtors, who have defaulted, had to repay another DKK 2,2 billion to the state. Since 1994, a total debt of DKK 301 million has been cancelled.

These loans were abolished in 1988 and replaced by the smaller state subsidised student loans with the explicit intention of preventing a similar debt situation in the future.

Repayment of state subsidised student loans

In the 1990s, there has been a declining uptake of these loans by students, and with subsidised interest rates the financial position of the graduates is now generally more favourable. For the majority, repayment of these loans does not represent an insurmountable burden, as the following figures will demonstrate.

Table 24. Debtors under repayment at the end of 1996, distributed by the amount of the annual instalment

Source: SUstyrelsen

The majority of all debtors pay less than DKK 6.000 a year - or less than DKK 500 per month - on their loans, and 93 per cent of all debtors pay less than DKK 12.000 a year - or less than DKK 1.000 per month. Among debtors with a higher education, 92 per cent pay less than DKK 12.000 a year. Compared with the basic salary in public service for graduates following long-term higher education courses of DKK 196.964 before tax a year - rising after 13 years of employment to DKK 289.467 before tax a year - these instalments do not represent a particularly heavy burden on their economy. The majority of the debtors are repaying their loans regularly, in accordance with the terms.

Of the total number of 117.530 debtors repaying, only 315 debtors have to pay more than DKK 20.000 a year.

Interest accumulated on the balance of the loans before graduation and interest charged on the loans during repayment are tax-deductible during repayment at an average "tax-value" of 44 per cent, which further reduces the repayment burden, notably in the first 2-3 years of the repayment time.

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