Why Does the Student Loan Differ in Other Countries?

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The education debt in the U.S has tripled over $1.5 trillion. In 2016, a record number of eight million students defaulted their federal student loans. A loan becomes the default when a student does not make their scheduled student loan payments for at least 9 months. The consequences for this can be severe. The student will no longer receive deferment and lose eligibility for any additional student aid. The default will be reported to credit bureaus which will damage their credit rating. Their wages may be garnished or their tax refunds and federal benefits may be withheld.

Also, their loan holder will be able to take them to court. The list goes on and on. The reason why is because of rising tuitions, disadvantaged students, and the government. Colleges and universities in other countries are driven to find more creative and resourceful ways of providing higher education at lower costs. They have reduced expenditures on business operations and took advantage of technology to redesign instruction in the classroom to make use of expensive faculty time. Through this all, it has still not translated into cost savings for students. The cost of education, the amount of taxes paid by taxpayers, and the sources and types of student aid vary across the world.

Tuition and fees in America are the highest in the world with the U.K following right behind. Americans often hear that other countries have better education systems, healthcare, and wages. This may be valid in some aspects, but it is true that when it comes to education. This is because of affordability and access to higher education. The U.S has a college attainment gap. High school graduates from wealthy families are almost guaranteed to continue on to higher education. Only half of the graduates from poorer families attend college. Most end up dropping out after the first few semesters from financial hardships and not being prepared. Because of this, Americans are at a disadvantage.

The cost of education has risen 500 percent since 1985 in America. In state students pay an average of $20,090 per year and out-of-state pay at least $34,220 at a four-year university in tuition, fees, and room and board. The U.S did rank first in the world for four-year degrees among young adults. Now, they rank twelfth. This makes studying abroad more appealing. Although the U.S and U.K tuitions are in the same range, the average debt per student in the U.S is $7000 more. Also, in the U.K, there is $100 billion total student loan debt compared to America’s trillion. Yet, the annual per capita of the U.S is around $56,000 per year which is significantly higher than places such as China, South Africa, and South Korea. Many countries offer free tuition such as Norway, Denmark, and Switzerland. Students in those countries still have to take out government loans to cover other fees and living expenses. Yet, they still owe less than Americans. This is why many students in the U.S are choosing to study at universities in other countries to save money.

There are many pros and cons to making that decision. First, English instruction is not offered everywhere. If one doesn’t speak multiple languages, they must check to see what accommodations they can make. Also, foreign school’s accreditation may not be renewed or approved. Just because its free doesn’t mean it’s a good idea. The term “free” doesn’t explicitly mean free everything. Every degree from a foreign school does not transfer back to the U.S. One must make sure that their degree will be recognized in the U.S to find jobs back home. Lastly, one must be ready mentally to experience a new culture with different people and different lifestyles. This can be hard for students who are not used to change to adjust to. A student looking to study abroad should be aware of this and have an open mind to try new things. The good side to all of this is that even though a student is leaving the country for school, some U.S aid programs will still apply if they plan on coming back to work.

Many people wonder why the U.S does not offer free tuition or at least cover some fees. It is because, in other countries, taxpayers absorb the cost of education. For example, in Europe, they traditionally have higher taxes which allows for extra services to be provided. The Organic for Economic Co-operation and Development (OECD) releases a report on tax burdens on earnings among member countries. It ranks countries by their tax wedge percent, the dollar measure of the income tax rate. Germany has a tax wedge of 49.3 while the U.S has 31.5. Belgium has the largest standing at 55.6. The tax wedge is not driven only by free tuition costs, but the countries that offer that benefit have higher tax rates. If the U.S was to follow behind European countries and tax the income of citizens, their tax rate will increase.

Germany has one of the most comprehensive debt-free college programs. Yet, Germany has a lower percentage of college attendees than the U.S. The U.S has 94% tertiary enrollment while Germany has 62%. The percentage is calculated by taking the tertiary enrollment as a total percentage of the total population of students who graduated in the last five years. With the exception of Finland, because America has more students enrolled in some type post-high school education, it adds complexity to adding a debt-free college plan in the U.S. Having to pay a tuition discourages students to getting university degrees with good grades and low incomes. Peter-André Alt, a student from Berlin, states that “being unable to charge tuition means universities are overcrowded and thinly stretched, and that hard-pressed taxpayers are unfairly forced to fill the void, even if they don’t go to college or have kids who do”(Marcus, par. 5). Germany makes free education look good but in reality, it is hurting their economy.

In 2006, German institutions were allowed to start imposing tuition. Students protested. In 2014, tuition was gradually being eliminated at universities who taught the majority of their students. The percentage of enrollment raised 22 percent as tuition dispersed. The cost to taxpayers rose 37 percent. For many countries, like Germany, who are unable to charge for tuition, are missing an important source of revenue. Economists worry how long their governments will be able to support these costs with a new law lingering around that will limit the number of money states, which operate these schools, can borrow. In Scotland, low-income students see no advantage to when universities stopped charging tuitions because they were already exempt from it. When the shift cut grants to cover their rent and food, the net effect was a transfer of $25 million from lower-income students to their wealthier classmates who could afford to pay for tuition but no longer have too.

The shift to government funding in Germany combined with their enrollment status has led to a 10% decrease in spending per student reported the OECD. It is $16,895 compared to the U.S at $27, 924. German undergraduates stated in an interview that they are stuck in lecture halls with hundreds of people. The Ph.D. candidates do most of the teaching. They do not have enough money for research or teaching. Without money, they lose the opportunity to enhance their financial support ad budget systems. If universities could collect fees, they could invest more in their education. Peter-André Alt, president of Freie Universität Berlin stated that “the taxpayer is paying for the universities whether or not they’re benefitting. A fee system assigns the cost to the person who is benefitting” (Marcus, par. 7). Economists agree that free institutions have much fewer resources than higher level universities in the U.S. More money would improve the quality of education everywhere.

There is a plan called the Clinton plan, raised by Bernie Sanders, but was used as a centerpiece for Clinton’s presidential bid. The proposal would leverage state and federal money to make public universities that account for ⅔ of U.S enrollment tuition-free for students with family incomes of at the most $125,000. Over a span of 10 years, it would cost over $350 billion. Money from eliminating certain tax deductions for the wealthiest Americans will be used to pay for it. Analysts predict that this plan would shut out poor and nonwhite students. The top universities where many people will start applying to will become extra selective. This will exclude those who would already land in overwhelmed public universities and community colleges with low success rates.

Through it all, everyone has an opportunity to go to school and most countries try to help in some way, shape, or form. Student aid is always available just in different types from different sources. Foreign countries offer loans, grants, and also stipends to cover tuition and living expenses. The U.S government offers 3 types of financial aid programs– grants, loans, and work studies. Grants do not have to be repaid, such as the FAFSA. Loans are borrowed money in which is repaid with interest. Work studies are work programs where you earn money to pay for school.

Through these programs, the U.S Department of Education awards over $120 billion a year to students. There are also two major tax credits available. Tax credits are more valuable tax deductions. It is the American Opportunity Act and the Lifetime Learning Credit. Although one cannot claim both credits for the same student in one year, the American Opportunity Act is generally the most beneficial. Financial aid may even be offered by state governments. Most colleges and career schools offer scholarships from their own funds. Many nonprofit or private organizations also offer scholarships or grants to help students pay for school. The military offers the GI Bill. There is free money out there. Students in America must make the effort to go get it.

Work Cited

  1. “College Access and Affordability: USA vs. the World.” Value Colleges, 1 Nov. 2016, www.valuecolleges.com/collegecosts/.
  2. Jackson, Abby. “’Free’ College in Europe Isn’t Really Free.” Business Insider, Business Insider, 25 June 2015, www.businessinsider.com/how-do-european-countries-afford-free-college-2015-6.
  3. Martin, Emmie. “Here’s How Much It Costs to Go to College in 25 Countries around the World.” CNBC, CNBC, 15 Oct. 2017, www.cnbc.com/2017/10/13/cost-of-college-tuition-around-the-world.html.
  4. Marcus, Jon. “How Free College Tuition in One Country Exposes Unexpected Pros and Cons.” The Hechinger Report, The Hechinger Report, 19 Mar. 2018, hechingerreport.org/free-college-tuition-one-country-exposes-unexpected-pros-cons/.
  5. “Types of Aid.” Federal Student Aid, 30 Sept. 2018, studentaid.ed.gov/sa/types.

Cite this paper

Why Does the Student Loan Differ in Other Countries?. (2021, Oct 30). Retrieved from https://samploon.com/why-does-the-student-loan-differ-in-other-countries/

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