Other countries show student loans can be ‘simple’ and ‘humane’

Brooke Samuelian graduated in 2013 from West Chester University in Pennsylvania with a bachelor’s degree in forensics and toxicological science — and a boatload of student loan debt.

A decade later, the Philadelphia resident still owes $25,000 on her loan.

“I've been pretty consistent with my payments, and it's like the number doesn't go down,” Samuelian said.

She is hardly alone.

Federal student loan payments in the United States resumed last week, bringing an end to a three-year hiatus that began during the COVID-19 pandemic. More than 43 million Americans now face interest charges this month, with full payments resuming in October.

For many borrowers in the U.S., making those payments — around $35,000 on average — is a challenge. Globally, student loan debt in the U.S. is second only to the United Kingdom, according to a 2022 Lending Tree report.

Before the pandemic, Samuelian worked full time at a pharmaceutical company and made regular repayments. But she still had to pick up a side job waitressing for additional income to pay her bills.

Samuelian lost that side job when the restaurant closed temporarily during the pandemic. She still works at Syndax Pharmaceuticals, but is considering returning to waitressing so she can better afford her student loan and other debt repayments. It's a juggling act.

“I'm not going to be able to pay other loans and things down as quickly with these payments resumed,” Samuelian said. “So, it will definitely have an impact.”

Many U.S. borrowers are in the same position, shouldering more than one job to make ends meet. Nearly 60% of high school and college students recently surveyed by the website ScholarshipOwl said they expect to take a second job or side hustle to make their loan payments after graduation. A 2022 survey conducted by the online financial services marketplace LendingTree found that 62% of Gen Z workers manage a side gig on top of a full-time job.

It’s an all-too-familiar story to economist Susan Dynarski, a professor at the Harvard Graduate School of Education and an advocate for President Joe Biden's new loan forgiveness plan.

The Supreme Court rejected Biden’s earlier plan to wipe away $400 billion in student loan debt.

Dynarski said that she believes that attending college should not lead to financial hardship — and even ruin — for some students.

“Student loan repayments can be humane and sensitive to people’s financial situations,” she said. “And the more simple and automatic it is, the more effective it’s going to be.”

Dynarski pointed to Scandinavian countries that view education as a public good. Sweden, Norway and Denmark are among at least a dozen countries in the European Union that  provide free tuition to public and private universities, as well as loans to cover living expenses. According to Accredited Schools Online, 22 countries around the globe offer free college.

Stipulations vary, though. Some countries make free college tuition available only to citizens or residents of neighboring countries, while others welcome international students into free classes taught in the local language, according to Accredited Schools Online. Whether students pay for their own living expenses also varies from place to place.

None of the programs guarantee that students will graduate on time.

In Argentina, where tuition is free, degree programs take an unusually long time to complete — five to nine years — and the country faces one of the highest dropout rates globally, at 73%.

Some countries, while not making tuition free, strive to make higher education affordable.

The United Kingdom, while charging comparatively high tuition fees for Europe, caps the amount at about $12,000. It also maintains an efficient loan system to support students, according to British economist Lorraine Dearden.

“Every single student who goes to university in the UK is entitled to a loan to fully pay their fees, and 95% of students take out these loans,” Dearden said.

On average, students in the UK borrow twice as much as their American counterparts. However, an income-based repayment system provides flexibility, automatically adjusting repayments based on an individual's income. This mechanism proved invaluable during the COVID-19 pandemic, Dearden said, when job losses led to payment suspensions.

“The beauty of these loans is that they’re done through employer withholding, so the student does nothing,” Dearden explained.

Students are only responsible for loan repayments when in a job and earning above the payment threshold. And the loan holder never has to do anything after leaving college — it’s all automatic.

“The employer calculates whether they are above the threshold in the current pay period and deducts if they are,” she said.

And if someone switches jobs, “the new employer is informed that they have to make deductions,” she said.

Even so, the system has many issues. In June, The Guardian reported that outstanding student loans in England specifically surpassed 200 billion pounds ($251 billion) for the first time — 20 years earlier than projected, as the number of university students continues to exceed expectations.

Recently, an Ontario mayor said she can’t afford a home in the township that she represents due to outstanding student loans in England, CTV News reported in August, and a public Facebook page devoted to complaints about student finance in England has garnered over 1,300 members.

Student finances are expected to be a battleground in next year’s general election, The Guardian adds.

In other countries, there is little to no flexibility with repayments.

In Colombia, university fees are set according to one’s socioeconomic status. But access to quality education remains a big challenge.

When COVID-19 erupted, out of work borrowers struggled to meet their loan obligations. Dearden said Colombia’s system “imploded” and the resulting crisis prompting the shift to an income-contingent loan system for new students.

That contrasts sharply with what happens in Nigeria, where not repaying students loans can land someone in prison.