As it stands, there are currently 28,601 student loans active in Estonia, loaned by commercial banks. According to data from the Bank of Estonia (Eesti Pank), a total of €60.1 million in student loans has been borrowed.
Banks are lending money to students at an interest rate of 5 percent. The state guarantees banks these loans at full trust, meaning student loans are essentially risk-free for commercial banks, totalling up to €3 million yearly in risk-free profit.
Last year, a maximum of €2,500 in student loans was available for one student. Loan limits will remain at that level for next year as well.
Swedbank is the market leader in student loans. Gätlyn Mägi, consumer finance area manager at Swedbank Estonia, said the bank has borrowed money to nearly 18,000 clients and the total balance of student loans at the bank is €37 million.
Mägi added: “Looking at this data, we can say that the demand for student loans is in a downward trend.”
A student has two options to apply for a student loan. Firstly, loans which are secured with real estate, but most loan takers apply for a loan by suretyship of two persons. There are a total of 421 loans secured by real estate, compared to 27,795 loans secured by suretyship.
In addition to those, there are 385 unsecured loans, which according to the Bank of Estonia are services handled as student loans that are not related to national loans. The conditions of these unsecured loans depend on the product and service and security is not always required.
Evelin Tammearu, sales manager of SEB Bank’s private customer segment, also noted that the popularity of student loans has decreased.
Tammearu said: “There are many reasons for this: a decrease in the amount of students, an increase in financial literacy, increase in general family welfare which allows for young students to be supported financially. The state-developed system of grants and scholarships is also helping.”
She added that a prime example of the decrease in popularity is seen in SEB’s student loan portfolio. From 2013/2014 to 2018/2019, the total balance of student loans went from €151 million to €65 million.
Tammearu explained: “Student loans are still a necessity for some clients, for example students in paid-only higher education and students abroad, also students from low-income families.”
SEB Bank’s position is that student loans no longer meet the students’ expectations and should be reorganized.
Coop Pank and Luminor stopped issuing student loans a couple of years ago. The newest participant in the student loan market is LHV, who has offered student loans for two years. According to Head of Retail Banking Financing Catlin Vatsel, the issuance of student loans is in an upward trend. The bank did not however publish any data.