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Students Fret over Loan Program in Lithuania

Linas Jegelevicius, October 13, 2009

Spanish King Juan Carlos shakes hands with students during a visits to Vilnius University in Vilnius, Lithuania, on May 7. (Photo: Petras Malukas/ AFP-Getty Images)

The National Union of Student Representatives of Lithuania (NUSROL) calls the state-supported student loan system "one of the most expensive in Europe," and the loan-granting conditions now "the worst." The organization claims that "many advanced states, the United States for example, are relinquishing the existing student loan system, claiming that it worsens students' financial situation to a degree where they are incapable of meeting their financial commitments and, therefore, [have to] file for bankruptcy."

The National Union has already appealed to members of parliament asking for an easing of the current system regarding the established conditions for obtaining student loans. Lithuanian student representatives are especially dissatisfied with the fact that interest rates exceeding 5 percent will be imposed on student loans during the study years. Thereafter, interest rates will increase to 10 or 11 percent.

Recently however, the Lithuanian government decided to endorse a proposal from the Ministry of Education and Science to compensate the part of the student loan interest that exceeds 5 percent. Only students who have their loans denominated in the Lithuanian national currency will be compensated. Those who want to apply for loans in euros won't receive interest compensation.

What probably worries students most is that the loans will cover tuition fees but not living expenses. Gintaras Steponavicius, minister at the Ministry of Education and Science, praises the new student loan system as very "viable" and asserts that this year the government will allocate 1.3 million litas (376,800 euros) to compensate for excess interest. Up to 9 million litas will be allocated for the purpose next year.

Five major Lithuanian banks will provide funds for student loans. The Lithuanian State Science and Study Foundation is accepting applications for student loans until October 4, and the list of students who will be granted state-supported loans will be announced October 18.

NUSROL criticizes the Ministry's excitement over the student loans, calling the system absolutely inflexible. "The conditions for state-guaranteed student loans are worse than those upon which loans were provided by the Lithuanian State Science and Study Foundation. The officials have pledged to keep their ears open for student proposals and wishes, but their promises, we see, were in vain. The anticipated student loan conditions exacerbate a student's chances to continue his or her studies. No doubt, studies in Lithuania remain among the most expensive in Europe; the conditions for anticipated student loans are definitely the worst," NUSROL representative Audrius Pacevicius told The Baltic Times.

Vilnius University freshman Aivaras Kuojelis said that he is contemplating taking out a student loan of 6,000 litas to cover his tuition fees and expenses. "I am pretty sure it won't be enough for the whole period of my studies, but I don't want this financial liability to strangle me. Therefore, I am planning to use the money to cover the tuition only during the first and the second year. Later on, I hope I will get a job that will help to pay my tuition fees," he said.

NUSROL says the average loan taken out by a Lithuanian student totals 6,000 litas. The government will have to allocate up to 100 million litas for student loans this year; approximately 1.5 million litas will be needed to compensate for the surplus interest. Estimates for next year's allocation are up to 100 million litas, with interest compensation as high as 10 million litas.

"The system is not very stable. Obviously, the funding will grow from one year to another. The deals between the government and banks are always fragile. Nobody knows what will happen if the ruling coalition stumbles," expressed NUSROL.

Student concerns over the issue are mostly echoed within the ranks of parliamentary social democrats. Deputy chairman of the faction, Juozas Olekas, said that he is convinced that loans, at lower interest, could be successfully provided by the Science and Study Foundation, as was previously done. "I can't find the right explanation for what was wrong with the previous system. It worked quite smoothly and was widely supported," he said.

Chairman of the Committee of Education, Science and Culture Valentinas Stundys (Homeland Union) opposes the social democrats, affirming that the expansion of the student loan system might be "too big a load" for the state.

President of the Association of Lithuanian Banks Stasys Kropas voiced his only concern regarding changes to the student loan system, referring to it as "too quick to be implemented." "After passing the law, there are less than two months left for issuing new [state] credits. Many bank managers have not yet been able to find out how the system works, so, naturally, there might be some nuisances when the system starts to work. The law should have been passed as early as [last] spring so that banks could have had enough time to implement it properly and smoothly," Kropas said.

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