Income limits for student financial aid

Other Publications, Reports 37 Tuomas Kosonen, Sampo Järvinen

The report conducts calculations on the effects of changes in income limits for student financial aid targeted at higher education students. The purpose of the income limits in student financial aid is to ensure that students with high incomes are not granted study grants. At the same time, current income limits restrict students from earning as much as they would like.

The calculations use a simulation model that allows assessment of how students’ income distribution would change under different scenarios of adjusting the income thresholds. According to the results, the current income limits could be increased by, for example, 50 percent. In that case, the annual income limit for a student receiving study support for nine months would rise from approximately €12000 to €18000.

The results suggest that such an increase would largely eliminate the distortionary effects of current income limits, since only a small share of students would exceed the higher threshold. Taking into account both taxes and transfers, this option would increase net revenues of the public sector by an estimated €5.9 million per year. (AI translation)

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