The disparities between the U.S. and Australian systems for student loans are stark.
Champion noted that student loan debtors in the United States who select the conventional 10-year repayment plan will have their monthly payments stay constant even if their income changes. For the most part, it’s like making a loan payment.
However, repayment is based on a borrower’s income under the Australian student loan system.
Let’s take a closer look at the following to understand these crucial distinctions better:
- How Australian student loans work
- How to copy the Australian student loan arrangement in the United States.
- In Australia, how do student loans work?
Government-run HELP offers interest-free loans to university students under the Australian student loan system. Instead of charging interest rates on student loans, the loan sum is linked to inflation.
HELP does not require borrowers to pay back their loans until their income reaches a particular level, changed yearly. When an individual’s annual income hits A$46,620 (US$33,300), they must begin paying back 1 percent of their loan balance.
As the borrower’s income rises, so does the repayment rate. Over 136,740 Australian dollars (approximately $98,000), repayment is set at the maximum 10% of income for 17 subsequent income levels. As a result, Australian college graduates who obtain high-paying jobs directly from school pay off their loans fast, while those whose income stays low have a minor responsibility to return their loans.
Consequently, according to a 2018 New York Times study, the average Australian college graduate pays off their student loans in eight to twelve years. Paying down student loans may take anywhere from 17 to 20 years on average in the United States, depending on various circumstances.
- Your center of gravity
- Plan of restitution
- When you’re paying payments, where you reside.
The United States should adopt a student loan system similar to Australia’s.
When the Higher Education Act of 1965 was signed into law by President Lyndon B. Johnson in 1965, fewer people went to college, and tuition was considerably lower than it is now. This is a crucial point to remember when looking at the American student loan system.
Johnson’s educational initiatives were well-intended, but he probably didn’t foresee how costly college would become in just a few generations. The student loan debt situation in the United States argues that more modifications are required to the legislation.
In reality, the expense and size of higher education in the United States and Australia are critical obstacles to extending Australia’s system to the United States. Taxes account for a more significant percentage of GDP in Australia, even though the country’s population is much lower than in the United States.
According to a personal finance communications professional and Macquarie University student, “to expand our [Australia’s HELP] throughout America would have a significant economic effect because of the size of the population and the enormous number of educational institutions.”
Although implementing programs like HELP, which are modeled after Australia’s student loan system, might ease the strain on American borrowers, doing so would need a significant injection of new funding.
Hutchinson added that it would be a long-term advantage for the economy if it achieved that.
American politicians and presidential hopefuls are focusing their campaigns on ways to bring down the cost of higher education and make it simpler to pay back student debt. All public universities might be made accessible or student debt eliminated, according to some. However, only time will tell whether any of these initiatives come to fruition or if the United States can adopt a more Australian approach to student debt repayment.