Why are Polish students not interested in study loans?

By: Klaudia Wolniewicz-Slomka, Economist

The popularity of student loans varies significantly across countries. According to the OECD report “Education at a Glance 2017”, almost 90% of English students at bachelor’s or equivalent level benefited from public loans in 2015/2016, while less than 1% of Polish students during the same period did. Moreover, as shown in the Figure below, the share of Polish students who took student loans has been decreasing since 1998, when the public student loan program was introduced in Poland. In the first year of functioning, 100,000 students received financial support within a student loans scheme, while twenty years later only 3,700 did.

Figure: Student Loans Between 1998 and 2018. Source: data obtained from the Ministry of Science and Higher Education of Poland in the frame of the SHIFT project, 2018.

In general, students in Poland are eligible for student loans regardless of the type or field of studies and the type of university (public or private) they study at. However, they must hold Polish citizenship (although there are some exceptions to that rule), commence their studies before the age of 25, and their monthly household income cannot exceed PLN 2,500 net (EUR 595) per person. Student loans in Poland are attractive: the interest rate for 2018 stands at 0.875%, monthly tranches can run up to 1,000 (EUR 240), and the repayment can start 2 years after the end of studies.

Despite a number of changes that the government implemented since 1998, including (1) the increase of the income threshold, (2) the increase of the monthly tranche, and (3) the widening of the scope of merit-based loan waivers, among others, student loans still play a marginal role in the financing of higher education in Poland. With these extensive changes in mind, it is interesting to tackle the question why student loans are so unpopular among Polish students.

First of all, Poland has a dual system of the financing of tertiary education, which is based on state subventions and on tuition fees. Full-time studies at public universities are free of charge, a right guaranteed in the article 70 of the Constitution. As a result, most Polish students do not pay tuition fees for their studies. Secondly, numerous types of financial support are available for Polish students. There are means-tested (social) scholarships, merit-based scholarships for academic and sport achievements, and scholarships related to a personal situation for students with disabilities. Also, some public organizations offer special financial aid for students (for example the Ministry’s of Science and Higher Education scholarship for outstanding educational achievements), as do NGOs and private companies. According to the report “Higher Education Institutions and Their Finances in 2016” published by the Polish Central Statistical Office, around 20% of Polish students received some kind of scholarship in 2016.

Equally importantly, the average costs of living for a Polish student, estimated in the “Portfel studenta” (“Student’s wallet”) at around EUR 370, are not particularly high, especially taking into account the many possibilities the Polish students have to gain income (scholarships, part-time jobs). Also, these costs are significantly lower than in other European countries. For example, monthly expenditure of a typical student in Sweden is around EUR 1,300, in Germany — EUR 903, in France — EUR 702, and in Czech Republic — EUR 506. The living costs are also kept in check by the fact that Polish students are frequently supported by parents. Last but not least, Polish students seem reluctant to enter into their adult lives with financial obligations. As noted by one of our interviewees, Polish students are more interested in non‑repayable money because of the prospect of having to deal with mortgage in later life. Some students may also be mistrustful of the banks, and the fact that application processes are not digitalized does not help this sentiment.

Given this reality, a student loan is not the first choice of securing funding for a prospective student in Poland, a phenomenon grounded in the Polish system of the financing of higher education as well as in student finance and sentiments. It is therefore worth tracking whether the new mechanism proposed within the framework of the SHIFT project, such as an innovative funding model based on a combination of private and public money, could be adopted in Poland.

The text was written in the frame of “Strengthen Higher Education through Innovative financial Tools” (SHIFT), a project which CASE has been implementing since November 2017. During the first stage of the project, CASE experts conducted desk research, student surveys and in-depth interviews with the various stakeholders involved in the financing of higher education in Poland. The article highlights the most interesting results of the first stage of the project.

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