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Student loans are handed out uncontrolledly, says Finance Ministry

The new study and student loan model developed by the Ministry of Education and Science (IZM) introduced this year is not sustainable – loans are issued in an uncontrolled model, the Ministry of Finance (FM) said in a release November 12.

IZM's model provides that a student loan does not require a second guarantor or any other safety mechanism; this function was undertaken by finance institution Altum. In the long term, the possibility of granting loans to students will continue to decline, so the loan model should be improved urgently, said FM.

For student loans in 2020/2021, risk coverage was planned on the assumption that the total amount of loan agreements would be EUR 13 million. However, the total amount of contracts concluded by November exceeds this amount by EUR 2.8 million, amounting to EUR 15.8 million.

Therefore, the FM has concluded that student and study loans are issued in an uncontrolled manner. Additional funding offered by IZM in 2020 will not solve the problems in the long term.

According to Finance Ministry, the IZM should immediately prepare an offer to manage the lending process without misleading students and also lenders, as well as strictly complying with the regulatory requirements in the field of financial policy.

Meanwhile, Swedbank, which undertook the issuance of state-guaranteed student loans, announced that contracts for new studies and student credits with the Altum guarantee have been suspended. Because of the high interest of students, the public funds earmarked for the implementation of the program have been exhausted this year.

Swedbank is prepared to resume lending once the necessary funding is available. The current estimates show that in order to provide support to cover tuition fees for all students this year, the IZM needs to find around €600 000 to €700 000. This decision does not affect students who have already signed an agreement with Swedbank on the granting of credit, the bank said in statement.

 

 

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