US tops list for loans hardship

September 9, 2005

The US emerges from a study of student finance as the worst place to have large debt and low income.

In contrast, the UK, Australia and Canada seem to be the best places for borrowers with a low income and high debt, according to a study comparing repayment conditions and debt management programmes in eight countries The study, by the Toronto-based Educational Policy Institute, found that rising student debt levels in England and Wales are offset by new loan repayment provisions, to the extent that debts are "probably quite sustainable" and that borrowers on low income have plenty of protection.

Alex Usher, EPI vice-president and author of the report, said: "Student debt in the UK is rising towards North American levels, but that doesn't mean the system itself is becoming Americanised.

"The UK has not only introduced an income-contingent system of loans, but has also learnt a key lesson from Australia, which is that income contingency only works for students if it is accompanied by generous subsidies."

The report examines the impact that interest rates, remission, subsidies, tax treatments, amortisation periods and the future income of borrowers have on student debt levels and repayment practices in Australia, Canada, Germany, the Netherlands, New Zealand, Sweden, England and Wales (the UK), and the US.

In the US, low-income, high-debt students face repayments as high as 15.3 per cent of income. In the other countries studied, the level is no higher than 6 per cent.

The study suggests that whether or not a loans programme is formally "income contingent" is less important in terms of debt management than the rate of interest charged, the length of repayment and the amount of debt.

Interest rates are a major factor during both study and post-study periods.

The length of repayment period is a key factor that affects ability to repay. Total debt matters, but less than most people may think. Even very high debt can be sustained given generous interest rate subsidies and flexible, targeted repayment policies.

Mr Usher writes: "How 'good' any given country appears to be on student debt varies considerably... Germany and the Netherlands might be seen as 'good' in terms of having low student debt, but the actual debt burdens of low-income graduates are considerably worse than in countries such as the UK, Australia and - at least among highly indebted borrowers - Canada as well."

Global Debt Patterns: An International Comparison of Student Loan Burdens and Repayment Conditions , Educational Policy Institute, Toronto.










Please login or register to read this article

Register to continue

Get a month's unlimited access to THE content online. Just register and complete your career summary.

Registration is free and only takes a moment. Once registered you can read a total of 3 articles each month, plus:

  • Sign up for the editor's highlights
  • Receive World University Rankings news first
  • Get job alerts, shortlist jobs and save job searches
  • Participate in reader discussions and post comments

Have your say

Log in or register to post comments