Student loan

Student loans are loans offered to students to pay for the costs of education. These loans usually charger lower interest than other loans. This article details how the systems work in different countries.

Australia

In Australia, students can pay for university courses using the Higher Education Contribution Scheme (HECS). HECS course places are government-subsidised places competed for using the rank achieved in the secondary school final examination, and are substantially cheaper than full-fee places which have lower entry requirements.

Courses are ranked into three bands, with a year's tuition costing around $4000-$6000 AUD. Students have the option of deferring the HECS fee until they start earning above a certain threshold, whereupon they will repay the government through the tax system; the amount owed is indexed to inflation. Alternatively, students can pay upfront at the beginning of the semester; this option attracts a 25% discount (2004).

Recent legislative changes that allow a high proportion of full-fee paying places, and lower upfront payment discounts have been a source of controversy.

Canada

Government loans

Canadian students are normally eligible for loans provided by the federal government, in addition to loans provided by their province of residence. The loans are normally interest-free until one graduates, and are sometimes supplemented with grants, depending on need.

Students must apply for the Canadian and provincial loans through their province of residence. The rules for what determines your province of residence vary, but normally the province or territory of residence is defined as where you have most recently lived for at least 12 consecutive months, not including any time you spent as a full-time student at a post-secondary institution. In other words, the province of residence is normally the province where you lived before you were a student.

The Canada Student Loan (CSL) provides for a maximum of $165 per week of full-time study, and more money from their province of residence. All Canadian students may also be eligible for the Canadian Millennium Scholarship Foundation Bursary (CMS Grant), and other grants provided by their province of residence.

For students in British Columbia for example, they may be eligible for a maximum of $14,300 combined loan and grant funding per year.

Professional students

Bank of Montreal has a line of credit program for professional and medical students which provides up to $20,000 or $25,000 per year respectively. Students may also be eligible for interest-free government loans on top of this line of credit.

For Canadian students studying abroad, the offers funding up to the total cost of education to students enrolled at least half time at approved colleges throughout the world.

Republic of Ireland

Although third-level tuition has been free in the Republic of Ireland since 1997, for other student expenses most of the major banks offer interest-free or cut-rate loans to students. There has been discussion on re-introducing fees, as recommended by the OECD, with deferred payment similar to the Australian system; i.e. a loan from the government repaid after graduation. The suggestion has however, been quite unpopular.

New Zealand

The New Zealand, state provided student loans and allowances are available to tertiary students who satisfy the funding criteria. Full-time students can claim loans for both fees and living costs while part-time students can only claim training institution fees. A non-refundable means-tested student allowance for living expenses can be claimed by students who are over 25 years old or whose parents have a low income.

Loans are repaid by a 10% tax surcharge on income, once the student graduates and is in employment. There is a minimum income level, roughly equivalen to the unemployment welfare benefit payment rate, that is exempt from assessment and an interest rebate that can be claimed for low income. Loan recipients who leave New Zealand are assessed on their world-wide income for repayment purposes, with a minimum annual payment being required.

In recent years, large student loan debts have meant that many recent graduates have sought higher paying overseas work in preference to remaining in New Zealand. This has led to skill shortages in some professions as local employers have been unwilling or unable to match international salaries. Medical related professions have been particularly hard hit due recent graduates having high loan debts and health employers having tightly controlled government funding.

Sweden

Study support and student loans in Sweden is administered by the Swedish National Board of Student Aid, a Swedish government agency.

United Kingdom

British undergraduate and PGCE students can apply for a loan through their Local Education Authority (LEA) or the Student Awards Agency for Scotland (SAAS). The LEA or SAAS then assesses the application and determines the amount that the student is eligible to borrow, as well as how much, if any, tuition fees the students' parents must pay. The family income, whether the student will be living at home, away from home or in London, disabilities and other factors are taken into account. 75% of the full loan (around £3,000) is available to all students, with only the final 25% being means tested (taking the total available up to as much as £4,000). It is paid in three installments during each year of the student's course (one per term). Special rules apply for some courses and for part-time courses.

Loans are provided by the Student Loans Company and do not have to be repaid until the student has completed their course and is earning £10,000 a year (£15,000 a year from 2006). The interest rate is updated annually and is tied to inflation (currently 2.6%), making the loan interest-free in real terms. The loan is normally re-paid using the PAYE system, with about 9% of the graduate's salary automatically being deducted to pay back the loan. There is no time limit for when the debt must be cleared.

A recent higher education bill has been passed that will make significant changes to the loans system from 2006. Up front tuition fees will be abolished, with the fee being added to the student's loan for them to pay back after there course is finished. However, instead of the tuition fee being fixed at around £1,000 for all universities (which, due to means testing, not all have to pay), universities will be able to charge varable fees of up to £3,000. This will significantly increase most graduates' debt and critics argue that it will create tiers of "expensive" and "cheap" universities. The main fear is that this will make university finacially inaccessible to many students. As a result, there have been national demonstrations and protests by student unions. The changes will only affect students from England who go to university in England or Scotland (English students who study in Wales will only be liable for the current £1,000 tution fees). Students from Scotland or Wales will continue to pay no tuition fees wherever they study in the UK. Northern Ireland has not yet decided on whether to adopt the changes and to whom they will apply.