The EU Funds What Member States Are Unwilling To: The Erasmus Master’s Degree Student Loan Guarantee Scheme

Posted: November 19th, 2013 | Author: | Filed under: education, european union | No Comments »

The following is an abbreviated and edited excerpt of my Master Thesis, defended last year, on the topic of free movement of studens within the EU. The excerpt is on the EU-level Erasmus+ Student Loan Scheme, which was approved by the European Parliament today. The issue relates in the grander scheme of things to the balancing of MS solidarity in the area of education and possibilities for a transfer union in the EU.

The Erasmus programme has been a success. Between 1998/1999 and 2008/2009 the number of students who participated in the Erasmus scheme of studying at least one semester of their studies abroad rose 104% (Wächter 2012). However, the impact of the Erasmus mobility programme is only limited, because students study abroad as a part of their studies in their home country, meaning that they will receive the diploma from their home university as well as majority of tuition there. This has prompted the Commission to propose to extend mobility advantages to also people who go to study a full course in another Member State.

As part of its proposal for the Erasmus for all programme, now renamed Erasmus+, which replaces the existing EU education mobility programmes, the Commission proposes to offer an EU-level loan guarantee facility for Master students who go to study in another European country. According to the Commission, the facility is needed because national loans are not portable across boundaries or are not available for Master level and private banks offer too expensive loans. The scheme works as guarantee offered by the European Union to the banks. In the proposal, the Commission estimates that nearly 12 000 Master students will make use of the possibility in 2014 when it will be established, reaching to over 67 000 in 2020, making it a total of 330 000 students. 25% of the overall budget of €19 billion will be used in the higher education sector.

The Commission’s proposal is a welcome one. If accepted by the European Parliament and the Council, it paves the way for a pan-European solution that is not too costly, because it is a loan guarantee scheme. Experience with a similar scheme operating in Estonia has provided modestly successful results, although a lot depends on the specific terms of the loans, maximum amount and repayment terms. In Estonia, there have been issues regarding repayments of the loans, forcing the guarantees to be realised by the banks and the government turning to courts to sue the mobile students. However, the benefits of the scheme seem to far outweigh the potential risks.

Similar loan guarantee schemes operate for example for SMEs within the Competitiveness and Innovation Framework Programme (2007 to 2013) as well as for film producers using the MEDIA Production Guarantee Fund within the MEDIA 2007 programme. These schemes cannot be compared with the breadth and the impact of the proposed European Stability Mechanism or the temporary European Financial Stability Facility, which are financially much more demanding and operate under different rules, but still represent a shift of financing from Member State to EU level. This will also be the case of the Erasmus Master’s degree student loan guarantee scheme.

In case it will be a success, it will be possible that more similar cost-sharing programmes will be introduced and expanded also to Bachelor studies. However, it can be questioned how large such a loan guarantee programme could be without it becoming similar to big transfer schemes such as the ESM. If a lot of students decide to utilise the scheme and its successors, then it will need to be funded in a substantially higher amount.

If the scheme will be a successful one, it should also provide assurances for Member States that a common solution on higher education funding is possible and perhaps at some point other areas of social support or funding for education will find their way to the EU level.

Perhaps this is the first step towards an US-style student loan and grant system, which has been successful in fuelling the higher education market there. That will be a matter for a more distant future. However, looking back at the humble beginning of the Erasmus programme, when it was still uncertain whether national laws would make it possible for universities to conduct Erasmus agreements (Lenaerts 1989), such a possibility seems no longer such a great leap of faith.

References:

  • Lenaerts, Koenraad, ERASMUS: Legal Basis and Implementation. European Community Law of Education, Bruno De Witte (ed), Nomos, Baden Baden, 1989, p. 123.
  • Wächter, Bernd and Irina Ferencz, Student Mobility in Europe: Recent Trends and Implications of Data Collection, in A Curaj et al (eds.), European Higher Education at the Crossroads: Between the Bologna Process and National Reforms, Springer Science+Business Media Dordrecht, 2012, p. 405.


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