What you should know about student loans in uncertain times?

Student loans have attracted a lot of attention recently, particularly due to uncertainty in the labour market, changes in interest rates and concerns related to repayment. It is therefore easy to understand why many students are now taking a closer look at their financial situation than usual.

When the future feels uncertain, decisions related to borrowing can also feel overwhelming and difficult. Yet for many students, a student loan gives an opportunity to secure their everyday finances, focus on their studies and build their future step by step.

We asked our expert Jere Koivu, Head of Unit, Eastern Helsinki, to answer questions from students about student loans and personal finances. 

Repayment of your student loan may cause extra stress if you can’t find a job immediately after graduation. It is good to know, however, that you don’t have to start repaying your loan on the day you graduate.

“In practice, there is more time for repayment than many people think. It’s not unusual for students to be unable to find a job immediately after graduation, and this doesn’t mean that taking out a student loan was a bad decision,” says Koivu.

Generally, as long as you receive student financial aid from Kela, you don’t need to start repaying your student loan or pay interest. The bank adds the interest on your student loan to the loan principal during the financial aid period and for one additional term after you stop receiving student financial aid. This means that you will not have to make interest payments during that time.

The interest on your student loan will fall due every six months about one year after you stop receiving student financial aid. You will start repaying your student loan about 1.5 to 2 years after you stop receiving student financial aid.

You don’t have to calculate when to start repaying the loan 

We will send you a proposal for a repayment schedule once we receive confirmation from Kela that your student financial aid has ended. 

“The key thing to know is that repayment does not start immediately and that it is possible to add flexibility to your loan repayments.”

If you become unemployed after graduating, Kela advises you to register as an unemployed jobseeker with the employment services in your locality and to apply for the unemployment benefit. If the eligibility criteria are met, you may also apply for other benefits, such as general housing allowance and social assistance.

Read more about unemployment benefits on Kela’s website

The interest rate on a student loan changes over time, which means that the total cost of the loan also varies in line with interest rates.

“However, the interest rate does not change frequently or unpredictably. In Nordea’s student loans, the reference rate is the 12-month Euribor, meaning that the interest rate may change once a year. Fluctuations in interest rates are common in loans, and they do not automatically affect your day-to-day life very much,” says Koivu.

In addition to interest rates, the loan amount and the repayment period affect your loan costs. For example, if you have a student loan of 10,000 euros, you study for five years and the repayment period is 10 years, your monthly payment would be 104 euros with an interest rate of 2.5% and 111 euros with an interest rate of 3.5%.

You can draw down your student loan either automatically, in which case the maximum amount specified in Kela’s guarantee decision is transferred to your account on the drawdown dates determined by Kela, or in instalments according to your needs.

“When taking out a student loan, you should therefore carefully consider how much money you actually need.”

“Your circumstances can change, and for example unemployment can temporarily make it difficult to repay your loan. You may worry about debt collection and payment defaults. If this happens, you should talk about your worries with others and ask for help,” says Koivu.

At Nordea, you can add flexibility to your loan repayments. You can shorten or extend the repayment period of your loan by adjusting your instalment, and change the repayment method and due date easily in Nordea Mobile or Netbank. In some cases, a payment holiday may be the best solution. You will pay interest as usual, but take a break from your loan repayments.

“The most important thing is to act as early as possible. When you look for solutions for your situation before you’re unable to make your loan payments, there are more options available to manage your everyday finances.”

Read more about the repayment of student loans