Despite the fact that the application period for student loans only recently began, an increase in interest is already noticeable. At Swedbank, the demand has grown by 20 percent compared to last year, and LHV also expects an increase.

"We're seeing that student loans have returned to the spotlight. Their popularity has grown, and students are taking out and using these loans. Considering the inflation of recent years, it's clear that €3,000 is no longer sufficient to cover even basic living expenses for students. When making loan decisions, students are looking for some kind of guarantee to cover at least one of their cost sources," said Annika Goroško, head of retail banking at LHV.

The government now plans to implement a reform that will double the maximum state-guaranteed student loan limit to €6,000. This would allow more students to focus on their studies rather than having to work. The goal of the loan is to make education accessible to everyone, especially students from less privileged backgrounds. Unfortunately, the current loan terms are not suitable for students, and the amount is too small to justify taking on debt.

"We still need to ensure that there is no financial inequality in access to higher education in Estonia, and with the current loan amount, students from poorer families cannot study without working," said Tõnu Viik, rector of Tallinn University.

The Ministry of Education and Research acknowledges the current problem, noting that students are reluctant to take out loans. In Estonia, less than 5 percent of students take out student loans.

"The biggest issue is that access to higher education, despite being free, has not improved. Students from families with a more modest social background, even though they have the academic ability to enter higher education, do not do so for economic reasons," said Renno Veinthal, deputy secretary general of the Ministry of Education and Research.

The intention is not to completely replace working during university with loans.

"Discussions are ongoing with banks about whether and to what extent interest rates could be lowered. We've also talked about the possibility of changing guarantee conditions to make them more favorable for borrowers, but these changes require further preparation," said Veinthal.

To accommodate the change in the loan limit, a budget line of €260,000 needs to be added to the state budget strategy. The changes are expected to take effect in September 2025.

--

Follow ERR News on Facebook and Twitter and never miss an update!