According to a world-leading student loan expert, the Biden administration’s recent decision to forgive student debt may help students now but won’t fix the long-term crisis. Professor Bruce Chapman from The Australian National University (ANU) said the only way to make the system fairer and sustainable is to put loans where students don’t repay debt until they earn a high enough income.
Repayments of student loans in the UK and Australia are more equitable
In the United Kingdom (UK) and Australia, income-based repayments for student loans are automatic and universal, keeping individual debt levels low and affordable for the taxpayer. Professor Chapman said:
“The current United States college student loan system is inferior — it hurts people in various ways. The pandemic has shown us how unfair the student loan system can be. The ups and downs of labor markets significantly affect someone’s ability to repay their student debt. In the past, it might have been individual bad luck, but COVID-19 affected the entire economy, and a cohort of graduates lost their incomes.
“There are some American loan programs based on income, but they’re not well known, difficult to apply for, and far from universal. The changes announced by the Biden administration are a good first step, but it’s only a bandaid solution. Long term, reforming the system to one modeled on the UK or Australia would make United States student loans more simple, efficient, equitable, and cost-effective.”
There are 19 times more students in the United States than in Australia, but the United States has more than 36 times the student debt. Australia’s total student loan debt is about US$46 billion, while America’s stands at about US$1.6 trillion.
Defaults of student loans affect 9 million American borrowers and their families. However, Australian and UK students cannot default because repayments only occur when their income is high enough. In a New York Times poll, experts worldwide voted Australia as the country that handles student loans the best.
Provided by The Australian National University [Note: Materials may be edited for content and length.]
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