Amount and payment of the student loan tax deduction
The student loan tax deduction is equal to 30 percent of the unpaid amount of student loan in excess of €2,500. Therefore, in order to qualify for the deduction, you must have taken out over €2,500 in student loans.
The deduction is provided for student loans that you took out during higher education studies begun on or after 1 August 2005. Interest payments added to the principal amount of the loan are not counted as part of the loan. If you have student debt for earlier secondary-level studies, that debt is also not included.
If you make repayments on your loan while you are still a student, that may reduce your student loan compensation. This means that it is generally not in your interest to start paying back student loan during your studies or during the term in which you graduate.
Maximum amount
The student loan tax deduction has a maximum amount based on the extent of the study programme.
| Extent of the degree programme in credits | Maximum amount of loan recognised, EUR | Maximum amount of the student loan tax deduction, EUR |
|---|---|---|
| 300 | 18,000 | 4,650 |
| 330 | 20,000 | 5,250 |
| 360 | 21,600 | 5,730 |
| Extent of the degree programme in credits | Maximum amount of loan recognised, EUR | Maximum amount of the student loan tax deduction, EUR |
|---|---|---|
| 180 | 10,800 | 2,490 |
| 210 | 12,800 | 3,090 |
| 240 | 14,400 | 3,570 |
| 270 | 16,400 | 4,170 |
If you earn a higher-education degree outside Finland, the maximum student loan tax deduction is larger. If you complete a master's degree outside Finland where the standard time to degree is 5 years,
- the maximum amount of loan recognised is EUR 31,500 and
- the maximum student loan tax deduction is EUR 8,700.
There is a maximum limit to the student loan tax deduction. Nine months' worth of loan is recognised for each academic year and five months are recognised for each term. The amounts of student loan debt taken into account when calculating the deduction are
- EUR 400 per month for degrees completed in a Finnish institution of higher education
- EUR 700 per month for degrees completed in a foreign institution of higher education.
However, the amounts of the instalments of student loan that you take out or when you take out the instalments are not significant. We take into account all student loans taken out during the higher education studies in full, but as regards the total amount only up to the maximum amount of student loan.
Example
A student of a university of applied sciences completes a 210-credit degree programme in the target time. She has EUR 16,020 in student debt at the end of the term in which she graduates. Deducted from this are the loans which she took out to finance a previous course of study at the secondary level (EUR 4,400) and interest added to the principal amount of the loan during higher education (EUR 440). After these deductions, the total amount of loans taken out while in higher education is EUR 11,180.
The amount of loan per degree corresponding to the target time to degree (3.5 academic years) is (3.0 acad. yrs x 9 mths/acad.yr + 5 mths) x EUR 400 per month = EUR 12,800. The student loan tax deduction is calculated on the basis of the student's actual loan amount because it is smaller. The student loan tax deduction is calculated as (11,180 - 2,500) x 30% = EUR 2,604.
Payment
If Kela grants you a student loan tax deduction, it sends the information required to apply the deduction to the Tax Administration. Kela also tells the Tax Administration about the repayments made on the student loan. You only need to pay down your loan in order to qualify for the deduction.
Your right to a student loan tax deduction begins the year after you graduate. Please note that repayments made in the year of graduation or earlier do not qualify you for a deduction. This means that it is not in your interest to make repayments on your student loans while you are a student or during the year in which you graduate.
As you make repayments on your loan to the bank, your taxes are reduced by the amount of the student loan tax deduction The deduction is made yearly from the taxes owed for the year of repayment. This continues until you have used up the deduction. However, the deduction must be used within 10 years of graduation. In other words, during those 10 years you need to pay back your student loan by an amount equalling or exceeding the amount of the student loan tax deduction granted to you.
If both the amount of the repayment and the amount of the deduction are more than the taxes you owe, the Tax Administration will take this into account in the subsequent years. You will get the tax deduction when you have a sufficient level of income and tax liabilities.
Any student loan tax deduction you have been granted will go unused
- if you do not pay taxes in Finland within 15 years of graduation or
- you do not pay back your student loan to the bank.
| Example 1 | Example 2 | |
|---|---|---|
| Degree completed | 210-credit degree from a university of applied sciences | 300-credit bachelor's or master's level university degree |
| Degree completion time which qualifies the student to a student loan tax deduction | 3.5 + 1.0 = 4.5 academic years | 5.0 + 2.0 = 7.0 academic years |
| Maximum amount of student loan recognised | (3.0 x 9 months + 5 months) x EUR 400 per month = EUR 12,800 | 5.0 x 9 months x EUR 400 per month = EUR 18,000 |
| Maximum amount of the student loan tax deduction | (12,800 - 2,500) x 30% = EUR 3,090 | (18,000 - 2,500) x 30% = EUR 4,650 |
| Loan repayment | EUR 200 per month, or EUR 2,400 per year | EUR 2,000 per year |
| Tax deduction | In the first year, EUR 2,400, and in the second, EUR 690 | In the first two years, EUR 2,000, and in the third, EUR 650 |