Dollars and Sense: A Global Look at Student Debt
Student loans make higher education an affordable option for individuals who might not otherwise afford a college degree. Unfortunately, graduates so often wind up trapped beneath an avalanche of debt, stacked up because they know a diploma increases their chances of employment. But with so many nations now experiencing a recession, what was once an advantage has now become quite the fiscal albatross for college and university students worldwide. Although student loans in America started in 1840, it was not until the past couple of decades when bloated interest rates and other predatory practices incited serious fiscal issues on the national level. Even if the start dates and policies differ, other nations seem to have experienced unfortunate increases over time as well.
In the United States, the average tuition rates at public four-year institutions spiked an average of 15% over the past year. The average net price rose by 4.6%. At private, non-profit, four-year schools, the tuition increased by 9.7% and the net price 6.1%. Data from the National Center for Education Statistics noted that 65.6% of undergraduate students in the 2007-2008 school year — the most recent time frame for which numbers are available — received financial aid in some form.
Sources of aid: Of the aid available, 48.2% came from federal sources, with 48% from nonfederal. Most recipients took the money in the form of grants, with a rate of 51.7% – 27.6% federal, 38.5% nonfederal. Loans make up 38.7%, with 34.9% from federal sources and 14.8% from nonfederal. Additionally, 7.4% paid for their schooling through work study programs.
Average debt: The class of 2011 graduated with 66% hamstrung by an average student loan debt of $26,600 for both private and public four-year schools. As the Project on Student Debt notes, the unemployment rate for college graduates sank between 2010 and 2011, from 9.1% to 8.8%. A further 19.1% either worked part-time or quit searching for a new job, while 37.8% ended up in positions not requiring a degree at all.
Interest rates: Interest rates vary depending on the type of loan, and an individual’s total amount of debt accrued hinges largely on that. Regardless, the grim employment outlook only exacerbates the anxiety over paying off their debts – especially since so many recent graduates began their higher education pursuits before the economy collapsed. The stress led to movements like Occupy Student Debt and Trillion Dollar Day protesting unfair lending practices and limited economic opportunities. Some researchers even believe these factors might be leading to the decline of male students on college campuses.
Some current initiatives directly address these demands, providing some semblance of assistance for future students. President Obama’s “Income Based Repayment” plan, for example, goes into effect in July 2014 and will cap interest at 15% based on a graduate’s discretionary income. Anyone receiving a loan after this date will not pay more than 10%. Working as a teacher leads to loan relief or forgiveness in certain situations as well. In Texas, the $10,000 degree plan aims to deliver a full college experience without the fear of crushing financial burdens after graduation.
Most of the available statistics on student debt issues in the U.K. only cover England and Wales, or England exclusively. Some British students graduate crushed beneath up to £40,000 from tuition, fees, and textbooks.
Average debt: The average student loan debt for new graduates hovered between £12,360 and £12,850 in the 2007-2008 school year. By 2012, it swelled to an estimated £26,000, though some posit it was “only” £16,141. What’s more, 93% of students receive some form of financial support, with single-parent and low-income households the most likely to require assistance – and to accrue worse debt in the process.
The cost of college:Four-year, full-time undergraduates studying in the U.K. pay an average of between £8,100 and £8,400 annually, depending on their fee waivers. Students with foundation degrees (roughly the equivalent of an associate’s degree in the United States) experience the highest unemployment rates, with only 30% finding a job in the six months or less following graduation. The general unemployment rate among British graduates was a startling 18.9% in 2011, down from 20.7% the previous year.
Even college graduates fortunate enough to find employment in the U.K. will earn an average of £15.18 an hour — hardly sufficient to cover living expenses and achingly high student debts. In response to such economic stressors, students have launched protests in 2010, 2011, and 2012 begging the government to address the mounting discrepancy between debt and employment opportunities.
Repayment plans:In response, the British government adjusted the repayment plan for federal loans. Students earning less than £15,795 annually will not be expected to start paying off their debts. Once they begin to bring in a salary higher than this, they pay off no more than 9% of their loans year. However, this only applies to money taken out prior to September 1, 2012. Any loans granted after this date will only be paid off once the graduate makes more than £21,000 yearly. Their monthly payoffs then scale along with their salaries, with interest rates of up to 3% applied based on the amount brought home.
Probably the most unfortunate side effect of the U.K. student debt crisis was the increased suicide rate amongst full-time enrollees. Between 2007 and 2011, it rose by a tragic 50%, with men more likely to commit suicide than women. Some of this might have to do with larger student populations overall, though experts believe fiscal fear and an uncertain future both contribute heavily to such instances.
Paying for college during and after classes ranks as the highest anxiety-inducing factor for Canadian students, with 27% reporting they feel “very stressed” over accruing debt. Another 32% admit that they will likely struggle to pay everything off following graduation, while 27% think they’ll probably break even. About 49% of college students in Canada receive some form of financial aid, and 58% of these will pay $20,000 or more; a further 21% must suffer debt of over $40,000. On average, they owe $27,000 after graduation.
Average debt: Four-year programs at Canadian colleges and universities run an average of $58,000, including tuition, fees, books, and room and board. Students pay average expenditures of $14,500 yearly, and semester-by-semester breakdowns run between $2,500 and $8,000. However, costs vary depending on the school’s location, offerings, and other factors. Anyone attending classes on the Atlantic side of the country can expect higher debt than their counterparts near the Pacific; a disconcerting 25% will likely wind up an additional $40,000 to pay off following graduation.
Unemployment rates:The employment rate for Canadians with bachelor’s degrees or higher sank from 75% to 73.7% between 2008 and 2011. Part of this had to do with the 10.7% increase in graduates. Positions could not open up at a pace fast enough to provide for every new worker entering the force.
Known as “Maple Spring,” more 300,000 Quebecoise college students (about three-quarters of the province’s total student population) and their supporters marched in the streets of Montreal, Victoriaville, and other cities protesting a reported 75% tuition hike (some sources say 80%). The 2012 demonstrations also involved a walk-out from classes and led to international headlines when they led to arrests for assaults and other instances.
Unlike their counterparts in the U.S. and U.K., Canadian college students have yet to receive any sort of settlement from policymakers. Montreal protests re-emerged in early 2013 as a response to Parti Quebecoise’s summit regarding tuition. As with Maple Spring, the anger quickly percolated into violence, and the police quickly declared the whole demonstration illegal.
Between 1996 and 2008, colleges and universities went from receiving 13.7% of their total funding from student tuition and fees to 33.7%, with the rest of its money coming from government sources. Enrollment increased as well, from 8.3% of the population attending higher education institutions in 1996 to 26.5% in 2010. Major discrepancies in ultimate value exist in relation to students’ original residences, with those hailing from urban areas receiving ¥10,138.
By contrast, their rural counterparts only get a value of about ¥8,464 out of their attendance. As tuition and fees increase, enrollment among rural students decreases. Although 58.2% of China’s population lives in such areas, only 19.2% of qualified college-aged individuals actually attended classes in 2004. In 1994, that number was 30%. And the painful financial struggles for rural families hoping to send their children to college continue into 2013, as they typically pay more in tuition and fees than those from urban areas.
Typical costs:Average tuition in China runs about ¥40,000 annually, though the average rural family only earns ¥3,000 within the same span of time. The number of college graduates, inclusive of all demographics, quadrupled over the past ten years. Unfortunately, the job market has yet to fully catch up to the massive influx of degree holders. Only 78% of graduates managed to find positions a year after finishing school — and these numbers include grad students, freelancers, and seasonal and temporary workers.
Average debt:In total, Chinese college graduates owe ¥8.1 billion in loan debts. It’s difficult to gauge just how much individual students themselves must pay out once they find a job. But with tuition as low as ¥5,000 annually for a general major degree, ¥6,000 for medical school, and ¥10,000 for the arts, they generally fare a little easier than American, British, and Canadian students, unless they come from rural families.
Between 2001 and 2011, the number of students applying for student loans in Japan leaped up 70%. But penalties and extensions are on the incline as well. There was a 50% increase in the number of penalties given to graduates between 2006 and 2010; extensions went from 58,000 to 91,400. All told, 80,000 required extensions because of inadequate employment, and a further 2,092 recent graduates needed welfare to survive.
Employment problems:Japan’s current economic recession left 60% of its graduating student population since 2009 either under- or unemployed. Problematic, considering the loan system “recycles” its money — the money former students pay in gets paid back out to incoming classes. And in 2010, ¥263 billion worth of payments were delayed, while applicants drew out over ¥1 trillion in loans. The average yearly tuition and fee costs at Japanese colleges ran ¥11,865 in 2010.
Debt by earnings:An estimated $4 billion out of the current $15 billion worth of outstanding student debt in Australia will ultimately not be paid off. Unlike most countries, student loans tie into the Consumer Price Index rather than fixed interest rates, though the amount paid off yearly varies based on a student’s income. On the lower end, those making $50,000 annually pay off 4%, while the $83,400 or more grouping pays 8%. The under-$45,000 range will not pay anything until they begin earning the minimum salary. In 2010, the CPI sat at around 3.5%.
Tuition in Australia averages out to around $7,692 annually. Overall unemployment is lower than it is in most nations experiencing a recession these days, sitting at 5.4%. However, this number does not take into consideration individuals who have given up on their job search. In 2008, 19% of the unemployed attained some level of college education, down from a startling 34.5% in 1992.
What Students Can Do
Exact numbers might differ from country to country, but the same patterns leading so many college graduates toward under- or unemployment while juggling financial aid debt remain consistent. They spent their entire lives learning that pursuing higher education opens up myriad opportunities in life, only to discover that it can come at an unexpectedly crushing cost. Fortunately, students can still empower themselves to pick the option that won’t mercilessly slaughter their bank accounts and credit come graduation.
Understand the employment outlook of chosen career paths. Before committing to a specific loan, students must intently research their job prospects post-graduation. The Bureau of Labor Statistics or a trip to a career services department should help with this. Never take on needless debt if the resulting positions won’t yield enough money to pay it off.
Research what’s happening on a national level. Especially when it comes to legislation dictating how students should or can pay off their loans following graduation. For example, deferrals or deletions benefiting teachers might pique the interest of some. Income adjustments impact most students with loan debt, so it behooves them to read up on the latest news and views.
Never borrow more money than is necessary. It may be tempting to pull out a little extra, but that little extra turns into a lot extra thanks to interest. Most experts agree that the best amount is no more than what the colleges require for tuition and fees. If more is required, students might have to look at their employment options to supplement the loans.
Lowest interest rate: No matter how wonderful an offer may seem, the most important number on the form will be the interest rate. Even if it means taking out a lower-cost loan, the lower risk and lower debt make the decision entirely worthwhile.
Know the repayment plans. And know when the repayment plans start, most importantly. Late payments only mean penalties stack up on top of the interest. Stay in touch with lenders, too. They’ll provide insight into how to best pay them back and answer any questions that might pop up regarding the details.
Although predatory lending practices do require curtailing, there are a couple of measures students should consider before accepting financial aid. A little legislation and a lot of education will help ensure the debt issue alleviates over time — on personal and national scales alike.