Is Student Debt Uniquely American?
Given the level of controversy and debate that student debt generates in the United States, you might think that it’s a uniquely American issue. But student loans are actually quite common in other countries. And the list of countries where students take on debt to pay for college is diverse. Canada, Brazil, Chile, England, Sweden, and Australia all have student loan programs operated by the government, similar to the way that the federal government grants most student loans in the United States.
Why Are Student Loans Common Internationally?
Many countries offer student loans for the same reasons that the United States uses them. They can help students come up with the money they need to cover tuition and living expenses. Of course, free college or government grants can do that, too, but it is expensive for any government to pay for the full cost of college for everyone.
Case Study: England and Australia Shift Away From Free College
Let’s take a closer look at two countries that used to provide free college but shifted away from that policy: Australia and England.
In both countries, policymakers made university attendance free, but chose to limit the number of students in order to keep costs down. This meant that far fewer people went to college in Australia and England than otherwise would have – a result that many argue is not only unfair, but harmful to the overall economy in these countries.
There wasn’t an immediate way to resolve those concerns. On one hand, expanding free college to all students wasn’t financially feasible — paying for a universal free college program would have required higher tax rates or less spending on other government services, both of which were unpopular. On the other hand, abandoning free tuition was also unpopular.
The solution? A government student loan program. This enabled universities to receive more funding in the form of tuition so more students could attend. It also provided students with access to student loans to help cover their costs of attendance and deferred the fees and repayment of those loans until after graduation.
Still in operation today, these loans have unique stipulations. The governments designed the program so that students only need to pay back loans after their incomes reach a certain level — about $35,000 in U.S. dollars — in both Australia and England. And even then, they only need to pay back a small share of their incomes. Ultimately, the program was designed so that many students do not end up paying back all that they borrowed. The United States has since modeled aspects of these programs with our Income-Driven Repayment system.
Student Loan Policies Across the Globe
In both the United States and Canada, students can take out federal loans for both tuition and living expenses. In Sweden and Germany, students can only take out government loans for living expenses because tuition is free in those countries. And at the other end of the spectrum, England and Australia generally offer student loans only for tuition expenses. Students can’t take out government loans for their living expenses.
These are just some examples of student loan programs across the globe that can help us think about how we might improve our system. However, it’s important to consider that tuition prices, the cost of living, and the average amount of debt students borrow vary dramatically from country to country.
There is a lot to learn from how other countries handle student debt. Here are some resources to learn more:
- An International Final Four: Which Country Handles Student Debt Best? (The New York Times)
- Lessons from the End of Free College in England (Brookings)
- Australia’s Student Loan Problem Is a Teachable Moment for the U.S. (Brookings)
- College in Sweden Is Free But Students Still Have a Ton of Debt. How Can That Be? (Quartz)
- Restructuring Student Loans: Lessons from Abroad (The University of Michigan Gerald R. Ford School of Public Policy)