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Tax-exempt grants and scholarships will no longer reduce students financial aid

Parliament has approved a number of amendments to the Act on Student Financial Aid. Starting 1 January 2019, tax-exempt grants and scholarships will no longer affect student financial aid payments. Parental income limits are raised because income will begin to be assessed on the basis of taxable income.

Photo: George Dolgikh
Photo: George Dolgikh
Tax-exempt grants and scholarships will no longer reduce students financial aid

Tax-exempt grants and scholarship paid on or after 1 January 2019 will no longer count as income for purposes of student financial aid, announced in a press release Kela, the institution responsible for social security in Finland.

The former practice was criticised as unreasonable because grants and scholarships are often awarded as an incentive or as a reward for academic excellence.

Following the change, grants and scholarships will no longer reduce the amount of financial aid for which students may be eligible. However, taxable grants and scholarships will continue to be included in students’ annual income under the student financial aid scheme.

Parental income affects a student’s eligibility for financial aid if the student lives with his or her parents or is under 18 years of age. Until now, parental income has been assessed as earned or capital income minus work-related expenses. Starting 1 January 2019, parental income will be assessed as taxable income.

This usually refers to gross income before expenses or tax deductions. Because taxable income will almost always be larger than the income minus work-related expenses, the parental income limits are raised by 5–6 percent.

This change is being made in response to the introduction of a national incomes register in 2019. The incomes register shows salaries as taxable income.

The definition of income under the student financial aid scheme is revised to be make it possible for Kela to refer to the incomes register when reviewing applications for financial aid. For clients, this has the benefit that they will not have to provide Kela will documentation about salaries paid on or after 1 January 2019.

Financial aid for students at the upper secondary level

Parliament also passed a set of amendments to the Act on Student Financial Aid which will take effect on 1 August 2019. They include the introduction of a supplementary allowance for the purchase of study materials and changes to the financial aid provisions for students under 18 who do not live with their parents, including the amount of time per academic year for which financial aid is available in upper secondary school.

Starting in August 2019, children of low-income families who are completing vocational qualifications or attending upper secondary school will qualify for a supplementary allowance of EUR 46.80 to help them purchase study materials.

The allowance is available to students under 20 living with their parents and students under 18 living outside the parental home whose parents have a total annual income of 41,100 euros or less. It is also available to students under 17 who are covered by the child benefit scheme. Students who are not yet eligible for the study grant and who wish to receive the supplementary allowance from August 2019 must apply for financial aid in spring or summer 2019.

The supplementary allowance for the purchase of study materials is granted without application to all students already in receipt of study grant payments.

Starting August 2019, parental income will no longer affect the basic amount or housing supplement available under the study grant scheme for students under 18 who do not live with their parents. Parental income will continue to affect the supplementary allowance for the purchase of study materials, the low-income supplement to the study grant and, in certain situations, the eligibility for a government guaranteed student loan.

Students aged 17 who do not live with their parents and who currently do not qualify for financial aid on account of parental income will be eligible for financial aid starting August 2019. The application for financial aid must be submitted in the spring or summer of 2019.

August 2019 will also see a change to the amount of time financial aid is available to upper secondary school students per academic year. They can get financial aid for 10 months (from the beginning of August to the end of May) in each academic year. Kela will automatically extend the payments of upper secondary school students who currently receive financial aid.

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