A college education is now likely the second largest purchase an American will ever make – the first being a home. 44 million people in the US owe a combined 1.5 trillion dollars in student debt. 70 percent of students graduate with about $30,000 in debt. It is clear that the debt people are acquiring because of these tuition costs will significantly impede their financial wellness for years to come. But it doesn’t have to be this way. Colleges around the world have shown that the American higher education system is stacked against the student — even if it’s not the most expensive country for colleges.
Student Loan Hero compiled statistics on college costs in ten different foreign countries. They found that although some non-US countries do struggle with college loans, the American system has noticeably fewer safeguards to protect borrowers against debilitating debt.
Not all countries can be like Germany and offer tuition-free higher education. Students there only pay a small college service fee each semester (usually between $176 and $294 in American dollars). Because Germany’s system is open to international students, roughly 250,000 foreign students attended college in Germany in 2017. France’s college tuition model is the closest to Germany’s tuition-free model. Students in France paid an average of €184 ($217) for the 2016-2017 school year at a public university.
In the Netherlands, students who earn less than full-time minimum wage do not have to make payments on their student loans. Loan defaults are rare because monthly payments are capped at 4 percent of gross earnings above minimum wage when students do start making loan payments. Like students in The Netherlands, South Koreans do not need to pay back their loans until they have exceeded a predetermined level of income. South Koreans also enjoy a low fixed interest rate of 2.7 percent on most student loans.
The average Australian graduates college with $22,000 in unpaid loans. This is a higher average debt than most countries, but after graduation students are automatically enrolled in an income-driven repayment plan. Borrowers have to earn at least $40,000 before the government expects them to start paying back their loans. After reaching the minimum $40,000 income level, individuals are required to pay back between 4 and 8 percent of their income (the government takes this payment directly out of their bank account). Enough to make any American jealous, Australians don’t have to fill out paperwork to get enrolled in a repayment plan or to modify their payments as their income changes. The government automatically makes all these adjustments. Australian student loans also carry no interest rate. Because of these regulations, student loan default is nearly unheard of Down Under.
In Canada, a student can potentially avoid accumulating interest for five out of the first ten years after graduation. In Canada loans are discharged after 15 years while America has programs that students can enroll in that discharge loans after 20 to 25 years. Also, like Australia and South Korea, Canadian students don’t have to pay back their loan until they are earning over a predetermined amount. In Uncle Sam’s backyard, students are expected to make payments after six months of graduating even if they are working a low paying job.
The United Kingdom was the only country studied where public college, on average, cost more than in America. At $12,414 a year, public colleges in the UK cost over 50 percent more than they do in the USA ($8,202). Students in the UK are graduating with an average debt of £32,220 ($43,298), despite most bachelor degree programs running just three years. Like in America, student debt has skyrocketed in the UK: from 2011 to 2017 it went up from £40.2 billion to £100.5 billion. After graduation, all UK students are enrolled in an income-based repayment plan that sets very low payments in exchange for very long terms. The government does not forgive loans until borrowers have paid for 30 years. However, people may pay monthly payments as low as £24 on a £21,000 yearly salary.
Compared to America, one of the main differences abroad is that other countries tend to make repayment plans more available and understandable. It seems America is the only country, of those studied, where income-driven repayment plans are confusing and difficult. Coping with student debt without easy access to a well-planned income-driven repayment plan is an American thing. With so many people dealing with a student debt burden, the country must learn to deal with a burdened population. To address these two sides of the issue, the country needs to offer better options so that students and graduates can move on from college to their professional lives without the ball and chain of crippling debt strapped to their ankle. I don’t expect free tuition, like Germany, but I do expect something to eventually change. It almost seems like it has to.
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