The Issue of Student Loans

Education is expensive - this is a universal truth. A seemingly innocent way to help with the costs is taking out a student loan.

A student loan is money borrowed from the government or a private institution like a bank to help you pay for college. Loans provide students with funds that will cover most, if not all, college expenses depending on the type of loan you choose.

These loans are offered and available to all students with financial needs. Usually, the loan needs to be paid back once you’ve completed your education, though some private loans require payments while you are still in school.

A Short History

Bologna was the first official university to provide loans to some students in the late eleventh century. The first student loan system was formalised in 1240 by the Bishop of Lincoln at the University of Oxford.

The Colombian government began the world’s first national student loan scheme in 1951, and is still in place today. In Australia, loans were re-introduced in 1989, having been abolished in 1974, and used to finance a significant expansion of university places. In England, tuition fees were £1,000 for every full-time student year for some undergraduate students in 1998. This was increased to £3,000 in 2006 for full-time undergraduates, to £9,000 in 2012 and currently stands at £9,250.

Types

Today, there are two approaches to student loans adopted by different countries:

1. Time-based repayment loans (TRBL): a series of repayments over a given period, for example, ten years.

2. Income contingent loans (ICL): repayments dependent on the borrower’s (the graduate) future income.

Some Common Terms

1. Loan Repayment Term: That’s how long you have to pay the loan back. The term varies depending on the amount borrowed, the institution you've borrowed from, and the loan agreement terms.

2. Interest Rate: This is how much interest you’ll pay on the loan. Interest rates can be fixed or variable, i.e., can be the same for every installation or change. These rates are typically based on your credit score.

3. Principal: This is the base amount you owe for the loan, not including interest.

4. Credit Score: An indicator of your ability to repay your debt. Your credit score takes into account the information on your credit report. Lenders may use a credit score to determine whether you're eligible for a loan and the interest rate. Typically a higher score makes it easier to qualify for a loan and may result in a better interest rate.

5. Default: This refers to the failure to make payments on a loan according to your loan terms. A loan can also go into default if you fail to meet other terms of your promissory note or written agreements with the loan holder.

We often hear about the student debt crisis even if the student has passed out from college for years. This is because, with added interest and a lack of high-paying entry-level jobs, immediate repayment is next to impossible. Let's look at this across different countries.

Taiwan

As summer arrives and local Taiwanese universities turn toward welcoming their new student classes, financial capabilities can be a huge turn down for some students in underprivileged areas like most other countries.

According to a database by Taiwan Panorama, tuition and fees are charged NT$59,490 at public universities and NT$109,806 at private universities, representing 10.91% and 20.12% of Taiwan's average per-capita income in 2009. Later in 2014, as awareness of student access to education enjoyed a thriving boom, conversations in legislative institutions started to rise and focus on the barriers of student debts. The department, however, still failed to manage and make sure borrowers' monthly payments were being tracked. Since then, a record of only 157 loans have been forgiven through income-driven plans.

Fortunately, in late April 2022, the Government Accountability Office faulted the Education Department to start the income-driven repayment program — a series of plans that provide reduced monthly payments and a carry of guarantee to eliminate all remaining debt after 20 or 25 years of payments.

Sweden

Education in Sweden is compulsory for all students from the ages of six to sixteen. Education is free for public schools, local public primary and high schools, which the government funds. Students are more inclined to study at free public schools as the education is excellent and it's more efficient. Because of this, many students don’t have to worry about paying a student loan in high school as they don’t need to take them.

Most public schools in Sweden follow the Swedish curriculum, which is also Swedish (Svenska), which can be difficult for international students who study in Sweden but do not know the language. These students can apply for the IB program or the international baccalaureate, which requires payment of fees. Most international students study the language as it is encouraged to learn Swedish to study in the free public schools; they can also take extra Swedish courses, both in school and online.

For college, however, civilians do need to take loans. The Swedish National Board of Student Aid (Centrala Studiestödsnämnden, CSN in Swedish) is in charge of everything under the Swedish student aid. If a person chooses to borrow money from the CSN, they must repay the loan mandatorily. A payment plan will be sent when it is time to start making the payments. A maximum of 25 years can be taken to repay this loan, and it must be fully paid by the age of 64.

However, Sweden's loans are stringent, which can sometimes deprive the students of studying.

“There is a problem related to the amount of student loan. Now, the rules set a maximum amount of 25 thousand Euros. Still, several training programs are more expensive than these maximum ceilings,” said the student union president in Stockholm.

Students have to seek additional funding in addition to the loan already, which has to be received under the guarantees of one's parents and the state.

USA

Student loans may or may not work similarly in your country as in the United States. Here in America, the idea is that if you can’t pay for college, you can apply to borrow money and pay it back at a later date - with interest included, of course. However, tons of people are unable to pay off their loans due to financial instability, low income, job loss, or other economic consequences. Currently, the student loan debt is $1.61 trillion, affecting over 43 million people in the country. This mainly affects Black people as they don’t own the same resources as white people. Due to this, students will have a lower credit score, lose eligibility for financial aid, and possibly get arrested if they are in too much debt. You are safe from the risks that follow when you don’t pay them by paying off your loans sooner, so be smart with your money!

Logo

A student loan. A student loan is a loan taken out to help students pay for their education. Many parents and students in many nations are struggling with debt. In Africa, for example, one research found that over 71% of parents were prepared to go into debt to pay for their children's college education. As a result of increased educational prices, more students are requesting loans, especially since many more are attending pricey private colleges than in the past. Even if student loans are obtained, the parents or student must repay them within a limited period of time. If you don't pay your school loan in India, the lender will send you and your guarantor, if you have one, reminders. You will default on your loan if you ignore the warnings, and your credit score will suffer significantly. For an extended period, you would be unable to obtain any type of loan.

---

Authors

• Siya Heda

• Nicole (Wei-Tung), Ling: Taiwan

• Adithi Natarajan: Sweden

• Shivika Varshney: USA

• Laveena Gangwani: Logo, West Africa