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EACEA National Policies Platform:Eurydice
Higher education funding


3.Funding in education

3.2Higher education funding

Last update: 27 November 2023

Higher Education Funding

Four higher education institutions are public and three institutions are run by private parties that receive public funding. Public and private higher education institutions receive individual appropriations from the State budget. Under the Act on Public Higher Education Institutions No. 85/2008 the institutions may charge enrolment fees. Private institutions charge tuition fees. The University of Iceland, which is by far the largest institution at this educational level, has substantial forms of income from a lottery that falls outside provisions made in the State budget. Income from the lottery may only be used on building and maintaining premises.

The core funding of all higher education institutions in Iceland, regardless of ownership, is based on block funding per student. The Ministry of Education, Science and Culture allocates block funding for each institution, based on a fixed number of students, for each institution. The institutions are allowed to enrol more students than it gets funded by the Ministry. The category of full-time- student-equivalent differs between different fields of study. This means that funding allocated per full-time student in medicine is larger than, for example in humanities.

Apart from the block funding per student, the funding of institutions is based on performance-based contracts between the Ministry and the institutions. These performance based contracts are used to allocate funds for research and development within each institution and may vary from one institution to another. 


On this page

1 Financial Automomy and Control

2 Financial Support for Learners´ Families

3 Financial Support for Learners

4 Private Education

Financial Autonomy and Control

The Higher Education Institutions Act stipulates internal financial and management autonomy of the institutions. The formal relationship with the Ministry of Education, Science and Culture is further defined in performance-related agreements with public institutions and service contracts with private institutions. The private institutions receive more than 50% from core funding for teaching and facilities from the central government, according to the same funding formula as the public institutions. In addition, they charge students tuition fees, whereas the public institutions do not have the legal authority to do so. The research allocation is based on a three-year agreement between the Ministry and individual institutions under its auspices. The institutions differ in the extent to which they engage in research. The income ratio of the University of Iceland is balanced between research and teaching, while other institutions receive most of their income for teaching. Furthermore, all institutions operate on a non-profit basis.

Public higher education institutions are only allowed to charge a registration fee, which is regulated by law and is the ISK 75,000 (approx. 500 Euros) during the school year 2017-2018. The payment goes directly to the higher education institution itself.

Financial Support for Learners´ Families

There is no financial support for learner´s families in Iceland.

Financial Support for Learners

The government has operated the Icelandic Student Loan Fund for several decades, with the aim of providing equal access to education for students. 

The Fund offers student loans that are sufficient to cover costs incurred by the studies (tuition fees, books and materials, travelling expenses, etc.) as well as the cost of living.

The Fund aids with costs for studies for full-time studies (60 ECTS). If the income forming the student’s tax base does exceed a certain amount, the assistance will be reduced by 10%. The rates of support for students living with low-income parents may be raised to 100% if the income of both parents is under the prescribed threshold.

To receive loans, students are obliged to complete at least 75% of full-time studies according to the programme of the educational institution, approved by the board of the Fund. Assessment of academic progress takes place each semester and if a student does not meet the required standards the loans will be reduced proportionally. For example, the loan to a student who completes 83% of full-time studies will be reduced by 17%. 

Repayment of loans begins two years after the completion of studies. The interest rate on loans made by the Fund is 1% but can vary, although it is at no time higher than 3% per annum on the principal of the debt. Student loans are index-linked, based on changes in the consumer price index of the Central Bank of Iceland. The annual repayment of loans comprises two elements: one fixed annual sum and one supplementary payment of 3.75% of the person’s income, calculated on the previous year’s tax base for municipal income tax purposes.

In accordance with the EEA Agreement, individuals from the European Union member states and the EEA-EFTA countries (Norway and Liechtenstein) who are resident in Iceland in connection with their work, their families, and others who are or have been supported by them, are entitled to student loans from the Fund. One condition for receiving loans from the Fund is that the applicant has been domiciled in Iceland for two continuous years, or has been domiciled in Iceland for three of the ten years preceding the beginning of the period for which the student loan is applied. 

Students from the Nordic countries who are permanent residents in Iceland and are registered at an Icelandic institution of higher education, are also eligible for student loans if they are not supported financially by their own country. 

The Icelandic Student Loan Fund may grant loans to other foreign students if reciprocal agreements have been concluded between their countries of origin and Iceland.

The Ministry of Education, Science and Culture annually offers a limited number of scholarships to foreign students to pursue studies in the Icelandic language and Icelandic literature at the University of Iceland.

Grants are available for postgraduate, research-oriented studies at higher education institutions in Iceland. The grants are awarded based on a research proposal submitted jointly by a student and a faculty member.

Private Education

There are three private higher education institutions (government-dependent private institutions) in Iceland. Private institutions receive considerable financial assistance from the state under service contracts made with each institution. The institutions are subject to the provisions of the Higher Education Institutions Act.

The institutions have private boards and a significant degree of autonomy and can, for example, decide such matters as admission requirements, progression of students from one year to the next, certification, etc. These matters do not differ much between public and private institutions.

The tuition fees for private institutions vary between higher education institutions and fields of study. The tuition fees for undergraduate programmes are approx. ISK 400,000 – 1,800,000 for each academic year and more for some postgraduate studies. In private institutions, students pay additional payments to student organisations.

Private institutions are recognised by the Ministry of Education, Science and Culture and are subject to the same provisions as public institutions concerning external reviews and quality control.

The private higher education institutions are:

• Bifröst University 

• Reykjavík University 

• Iceland Academy of the Arts 

The distinction between public and private HEIs is mainly based on legal differentiation. The role of public institutions is defined in separate laws and regulated by the Ministry. Additionally, the public institutions are legally obliged to comply with various laws and regulations applying specifically to them, such as laws on budgetary responsibilities, access to information and transparency, and recruitment procedures. The private institutions also operate under the Higher Education Institutions Act.