The student debt crisis isn’t restricted to the United States. Graduates in other Western countries also struggle with the cost of their college educations.
While student loan systems differ substantially between nations, the situations in other countries provide useful contrast to the state of student debt in America.
Student Loans in the United Kingdom with Lessons for the U.S. System
The United Kingdom has seen major changes in higher education finance over the past several decades. In fact, prior to 1998, most British students did not have to take out student loans at all. Education at public universities were tuition-free. More recently, following the adoption, and gradual increase, of tuition fees, loans have become a more prominent feature of British higher education.
In fact, British students graduate with much higher average debt than their American counterparts. As of 2019, it is the highest worldwide.
However, repayment is generally less onerous, as it is made through an income-contingent dependent payroll tax. This ostensibly ensures that low-income graduates are not unduly burdened. By most estimates, a majority will likely never pay the full balance, as loans are forgiven after 30 years across the board.
Nonetheless, as tuition prices have crept up and income thresholds for realistic repayment have only ong prospective students that their debt burdens will, like those of their much-discussed American compatriots, become unsustainable.
A Brief History
Until 1998, tuition at public universities was free in the United Kingdom. In 1962, maintenance grants were introduced in order to assist students with living costs as necessary and maintenance loans were introduced in 1990. These loans were administered by the government-owned Student Loans Company (SLC).
In 1997, the National Committee of Inquiry into Higher Education issued a report calling for the institution of tuition fees.
The following year, some of the report’s recommendations were implemented and the cost of tuition shifted to students up front. The next year, maintenance grants were eliminated. This was in large part a response to increasing college enrollments, which became impossible for the state to subsidize despite caps on per-university enrollment instituted in 1994. In the previous decade, they had almost doubled.
In the early years, following this shift away from free higher education, tuition costs still remained relatively low. Initially, tuition was set at a maximum of ?1,000 and a system of income-contingent loans was set up by the SLC to assist students in financing their educations.
By 2006, tuition had risen to a maximum of ?3,000. However, following this increase, borrowers were not expected to pay up front, with payment deferred until after graduation on an income-contingent system. Students did not have to begin repayment until they began making at least ?15,000 a year and paid 9% of their income above that amount toward the balance. Interest was set at the rate of inflation and the balance was forgiven after 25 years.
Six years later, maximum tuition was raised to ?9,000 a year. Graduates did not have to begin repayment until they began making ?21,000 a year or more. Interest rates were revised in alignment with the Retail Price Index (RPI), with a maximum of an additional 3% for students making over ?41,000 a year. The additional payday loans in Oklahoma percentage was scaled down for those making less.
Though the repayment threshold was meant to have been gradually increased, it was frozen at ?21,000 in 2015 for students who had matriculated in 2012 or after. Maintenance grants were eliminated again in 2016.
From 2018, maximum tuition was raised to ?9,250. And, following outcry over the 2015 decision, the repayment threshold was raised to ?25,000. In 2019, it was raised again, to ?25,725. Repayment remains at 9% of income above the threshold.