Wednesday, 11 July 2012

Norwegian government blunder: the Norwegian State Educational Loan Fund

First, some background: In Norway, younger people are incentivised to save money through a mortgage saving programme to better prepare them as first time buyers. Through the programme, younger people receive a higher than normal interest rate and are also entitled to additional tax deductions from these savings. The Norwegian State Educational Loan Fund provides financial support to students through grants and loans. If you work and make money while studying, the grant will be reduced if you earn more than NOK 145,400 a year.

Reducing the grant if you make money has been in place for many years. This means that hard-working people are penalised while those that live a complete student life (e.g. lots of spare time and partying) win - how is that for encouraging hard work and excellence! It gets worse however: In a recent decision by the Norwegian government and effective this fall, interest income from the mortgage savings programme will be included in the calculations of earnings (and all capital gains will be included as well). Apparently (according to nrk.no), this ensures the funds go to those that need it and hence forms part of the redistribution policy in addition to saving NOK 20 million. The new policy is however in direct conflict with the good intentions of the mortgage savings programme and yet again penalises the prudent and hard working. If the government is looking to save money, how about starting with reducing the number of government staff and the juicy pensions of incompetent politicians. It is nothing short of terrible policy making and is an embarrassment to the current Norwegian labour government led by Jens Stoltenberg and also to Kristin Halvorsen, the minister of Education and Research, and should be reversed with immidiate effect.

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