Millions of borrowers are watching out for the US Supreme Court’s decision on President Joe Biden’s flagship legislation to help American students with their crushing Federal student debt.
Interest and payments on Federal loans, which had been paused since March 2020, will resume in September.
The US joins other countries that have proposed support for borrowers struggling to repay their debt, but from Nigeria to Sweden to New Zealand, even countries that promise free tuition still expect school attendees to pay something. Examples from around the world show that forgiveness early in the repayment cycle isn’t likely — nor is it easy to get out of student debt once you’re in it.
United Kingdom
The UK allows students to borrow to cover both tuition expenses and living costs, amounting to a total forecasted average debt for students who started their course in 2021-22 of £45,800 ($58,220). Interest rates and payment plans will vary depending on the course and when it started. The current total student loan balance is over £200 billion.
Student loan payments are automatically deducted from salaries — most plans deduct about 9% alongside tax and National Insurance payments — and borrowers are expected to start making payments once they earn at least £22,015 per year. They’ll spend an average of 27 years repaying their debt. Depending on the repayment plan loans can get written off as soon as 25 years after payments started, though it can be as late as 40 years.
Sweden
Although universities in Sweden do not charge tuition to citizens or students from the European Union and Switzerland, in 2022 average loan debt levels were 153,800 krona ($14,327) for women and 149,600 krona for men. The debt is normally a result of living expenses. Student loans in 2023 incur a 0.59% interest rate and debtors are expected to make automatic payments which increase by 2% annually over the course of 25 years. That’s meant to help graduates pay less in the early years of their careers when earnings are at their lowest.
The loan must be repaid within 25 years and any remaining debt is written off the year the borrower turns 68. Those struggling with financial hardship can reduce their payments to 5% of their income.
Nigeria
A law signed this month by President Bola Tinubu will establish a Federal fund providing interest-free loans to Nigerians seeking higher education. The government will now direct 1% of oil and mineral profits, as well as 1% of revenue from the customs, immigration, and revenue services to a specialized fund housed at the central bank, which is estimated to initially total 200 billion naira ($268 million).
Loans made from the fund will cover tuition fees at domestic institutions, and only people whose personal or family income is under 500,000 naira per year will be eligible. Borrowers will need guarantors, and will be expected to start paying back 10% of their salary two years after finishing the military service that’s compulsory after graduation. There are no provisions for loans to be forgiven.
Australia
Borrowers can take out loans for their tuition but not for housing or other cost-of-living expenses, and are expected to start payments once their income exceeds A$48,361 ($32,285). The average student debt balance is currently A$24,770, and repayments, which are adjusted for earnings, can be up to 10% of annual income. More than 3 million Australians owe a collective $74 billion in student debt. There are no provisions for forgiveness.
The total student loan gets adjusted for inflation annually, which has been squeezing students badly lately. Previous repayments can get wiped out by rising prices, and salary increases may not cover the increase in the loan to be repaid.
The National Tertiary Education Union said in May that the repayment periods for some degrees could exceed four decades, in part due to increased course fees and high inflation. Lawmakers are pressuring the government to halt inflation-linked increases.
New Zealand
The average student debt balance in New Zealand is currently around NZ$24,000 ($14,791), while the average annual cost of college tuition for a domestic student is around NZ$8,000. Students who stay in the country after graduation are expected to start paying 12% of every dollar earned once their income exceeds NZ$22,828.
Many people move overseas after graduation, and in that case borrowers will face a 2.9% interest rate and will be expected to make minimum loan repayments based on how much they owe. Only 58% of overseas debtors had signed up to pay their debts for the year ended June 2022, and people living abroad are responsible for 92% of the total NZ$2 billion of overdue student debt.
In either case, debt is only absolved if a person dies or declares bankruptcy.
United States
The average tuition for one year at a US public institution was $9,400 during the 2020-2021 school year and $37,600 for a private school. Most scholars owe less than $25,000, and the total federal and private student debt is a whopping $1.8 trillion. Borrowers are expected to start repayments six months after graduation, barring proof of financial hardship.
There are still two repayment programs for federal loans, which comprise the bulk of the total US student debt burden, that offer narrow pathways to eventual forgiveness on some student loan balances.
The Public Service Loan Forgiveness program allows full-time workers in public-service roles like government and education to have their loans forgiven after 10 years of qualifying payments. It’s historically been hard to qualify for this program, and even after improvements only about 615,000 borrowers were approved for forgiveness between Oct 2021 and May 2023.
The US also offers several income-driven repayment plans, that anyone with federal debt can apply for, though they mostly benefit people whose debt balance outweighs their income. Monthly payments are calculated from any money a borrower makes above a discretionary threshold, which is currently 150% of the local poverty rate. The program doesn’t work for everyone, as some borrowers may be asked to pay more each month under an IDR plan than they would through standard repayment. Forgiveness for those who enroll in IDR plans can kick in after 20 or 25 years of payments, depending on the plan type.