Student loan

Understanding Student Loans: A Global Perspective

Imagine you’re about to embark on an educational journey that will shape your future. But what if the financial burden is too heavy? That’s where student loans come in, designed to help students pay for their post-secondary education and associated fees.

Australia: A Tax-Linked Scheme

In Australia, the HECS-HELP scheme stands out as a unique model. This loan is funded through a supplementary tax on taxable income, meaning you only start repaying it once you’re earning enough to make a difference. Is this system fair? Or does it inadvertently encourage graduates to leave the country?

Canada: A Province-Driven Approach

Canada’s approach is equally interesting, with the province of British Columbia allowing for driver’s license withholding if loan repayments or child support payments are delinquent. This policy ensures that students don’t just borrow and run. Does this make sense? Or does it create unnecessary stress?

France, Germany, New Zealand, Thailand, India: A Global Landscape

In France, Germany, New Zealand, Thailand, and India, student loans and allowances are provided to tertiary students. Each country has its own repayment schedules and interest rates, with means-tested scholarships, tax deductions, or government assistance available. How do these systems compare? And what can we learn from them?

The Vidya Lakshmi Portal: A Gateway to Scholarships

In India, the Vidyasaarathi portal was launched in 2015 to help students seeking scholarships for studies both domestically and overseas. By August 15, 2020, 37 banks were registered on this platform, offering 137 loan schemes. Is this enough? Or do we need more comprehensive solutions?

South Korea: Developing Talents for the Nation

In South Korea, student loans are managed by KOSAF (Korea Student Aid Foundation), which aims to develop talents that serve the nation and society. Default rates vary by major, with students in fine arts and physics having higher default rates. Is this approach effective? Or does it create unnecessary pressure?

The UK: A State-Backed System

In the UK, student loans are primarily provided by the state-owned Student Loans Company. Interest accumulates on each loan payment until the start of the next tax year after completion or abandonment of education. Repayments can be canceled upon death, disability, or after a certain period of time, and may also be canceled when the borrower reaches a certain age. Is this system fair? Or does it create uncertainty?

The United States: A Diverse Landscape

In the US, there are two types of student loans: federal and private. Federal loans can be subsidized or unsubsidized, with interest not accruing on subsidized loans while students are in school. Prior to 2010, federal loans included direct loans (funded by the government) and guaranteed loans (originated and held by private lenders but guaranteed by the government). The guaranteed program was eliminated due to a perception that it boosted companies’ profits at the expense of students. Federal student loans are generally less expensive than private loans. Is this system working? Or do we need more transparency?

Repayment and Relief

Repayment typically starts six months after graduation, with federal interest rates established by Congress. Some critics argue that this is a political decision. In 2010, the federal student loan program generated a multibillion-dollar profit for the government. Financial relief can provide a safety net for those under pressure to repay, helping them gain income and avoid defaulting. With federal student loans, borrowers can extend repayment periods, reducing monthly payments but increasing total interest paid. Is this enough? Or do we need more support?

Income-Based Repayment Plans

Income-based repayment plans allow borrowers to pay based on income, capping payments at 10% of their income. The balance owed grows during this period, with forgiveness after 10 years for public sector workers and 25 years for for-profit workers. Is this a fair system? Or does it create uncertainty?

The Future of Student Loans

Financial relief can provide a safety net for those under pressure to repay, helping them gain income and avoid defaulting. With federal student loans, borrowers can extend repayment periods, reducing monthly payments but increasing total interest paid. Is this enough? Or do we need more support?

The average annual tuition cost outpaces grant funding, with many students relying on loans to cover expenses. For-profit universities hold a disproportionate amount of federal loan debt despite low enrollment rates. States’ reduced public support has shifted financial burdens onto students, making it difficult for them to pay back loans. The median family income has declined since 2007, and default rates are higher among borrowers from lower-income families, women, and those entering repayment after their sophomore year. Student loans cannot be discharged in bankruptcy unless repaying the loan would create an ‘undue hardship’ for the student borrower and dependents. In 2005, bankruptcy laws were changed to prevent private educational loans from being easily discharged. This led to a comparison with credit card debt and concerns about lenders profiting from students’ debt. Investigations have uncovered anti-competitive practices between lenders and universities, resulting in higher interest rates and fees for borrowers. Some universities have rebated millions of dollars in fees back to affected borrowers, while others have settled false claims lawsuits against them. Economists predict a potential economic crisis due to the estimated $1 trillion of student loan debt, but most believe there is no student loan bubble.

Joe Biden’s 2020 presidential campaign promised student loan forgiveness, with 64% of Americans supporting $10,000 in forgiveness for individuals earning up to $150,000 annually. The applicant of the loan scheme must have resided or been domiciled in Hong Kong for three years immediately prior to application.