Student loans
United States
The United States uses a federally guaranteed student loan program to help college students pay for their education. The program allows students to borrow money at a reduced interest rate and defer payment until they are no longer in school. Student loans are generally offered as part of a total financial aid package that may include grants, scholarships, or work study opportunities.
In the United States, there are three types of student loans: two of them are sponsored by the federal government and the other type is private student loans.
A student loan has two major advantages over conventional loans - lower interest rates and easier repayment terms. The interest rate on a student loan will generally be at least two percentage points lower than the going market rate for conventional loans, but this will vary somewhat.
The student may have multiple options for extending the repayment period, although an extension of the loan term will likely reduce the monthly payment, it will also increase the amount of total interest paid on the principle balance during the life of the loan. Extension options include extended payment periods offered by the original lender and federal loan consolidation. There are also other extension options including income sensitive repayment plans and hardship deferments.
In coverage through established media outlets, many borrowers have expressed feelings of victimization. Common complaints include: feeling like the terms were not clearly described prior to consummation, having monthly payments equal to half of take-home income, wage garnishment by lenders, inability to charge off student debt in the bankruptcy process (as is possible with mortgages and credit card balances) and being crushed by unyielding lenders when befallen by unfortunate life events (such as disability which prevents work). There is a valid comparison between these accounts and the college credit card trend in America during the 2000's, and it could be argued that a similar form of corrective legislation is in order.
It is often more difficult to discharge a student loan in the USA in the case of bankruptcy. The legislation which covers this is 11 USC 523. This often means that student loans survive a bankruptcy unless the bankrupt can demonstrate "undue hardship".
Australia
Tertiary student places in Australia are usually funded through the HECS-HELP scheme. This funding is in the form of loans that are not normal debts. They are repaid over time via a supplementary tax, using a sliding scale based on taxable income. As a consequence, loan repayments are only made when the former student has income to support the repayments. The debt does not attract normal interest, but grows with CPI inflation. Discounts are available for early repayment. The scheme is available to citizens and permanent residents. Means-tested scholarships for living expenses are also available. Special assistance is available to indigenous students.
There has been criticism that the HECS-HELP scheme creates an incentive for people to leave the country after graduation, because those who do not file an Australian tax return do not make any repayments.
The United States uses a federally guaranteed student loan program to help college students pay for their education. The program allows students to borrow money at a reduced interest rate and defer payment until they are no longer in school. Student loans are generally offered as part of a total financial aid package that may include grants, scholarships, or work study opportunities.
In the United States, there are three types of student loans: two of them are sponsored by the federal government and the other type is private student loans.
Qualification
Most college students in the United States qualify for some type of student loan, although the amount they can borrow may vary based on several factors. Income level, parents' income level, and other financial considerations are all weighed to determine the amount you are eligible to borrow under the federal student loan program.A student loan has two major advantages over conventional loans - lower interest rates and easier repayment terms. The interest rate on a student loan will generally be at least two percentage points lower than the going market rate for conventional loans, but this will vary somewhat.
Repayment
Repaying a student loan is different, too. In most cases, payment can be deferred on the principal and the interest until the student is out of school. Repayment typically begins anywhere from six to twelve months after they leave school, regardless of whether or not they complete their degree program. In some cases, repayment begins if course load drops to half time or less, so it is important to check the exact terms and conditions of any student loan.The student may have multiple options for extending the repayment period, although an extension of the loan term will likely reduce the monthly payment, it will also increase the amount of total interest paid on the principle balance during the life of the loan. Extension options include extended payment periods offered by the original lender and federal loan consolidation. There are also other extension options including income sensitive repayment plans and hardship deferments.
Criticism
The student loan system has also been criticized including by supporters of other systems such as a grant system.In coverage through established media outlets, many borrowers have expressed feelings of victimization. Common complaints include: feeling like the terms were not clearly described prior to consummation, having monthly payments equal to half of take-home income, wage garnishment by lenders, inability to charge off student debt in the bankruptcy process (as is possible with mortgages and credit card balances) and being crushed by unyielding lenders when befallen by unfortunate life events (such as disability which prevents work). There is a valid comparison between these accounts and the college credit card trend in America during the 2000's, and it could be argued that a similar form of corrective legislation is in order.
It is often more difficult to discharge a student loan in the USA in the case of bankruptcy. The legislation which covers this is 11 USC 523. This often means that student loans survive a bankruptcy unless the bankrupt can demonstrate "undue hardship".
Australia
Tertiary student places in Australia are usually funded through the HECS-HELP scheme. This funding is in the form of loans that are not normal debts. They are repaid over time via a supplementary tax, using a sliding scale based on taxable income. As a consequence, loan repayments are only made when the former student has income to support the repayments. The debt does not attract normal interest, but grows with CPI inflation. Discounts are available for early repayment. The scheme is available to citizens and permanent residents. Means-tested scholarships for living expenses are also available. Special assistance is available to indigenous students.
There has been criticism that the HECS-HELP scheme creates an incentive for people to leave the country after graduation, because those who do not file an Australian tax return do not make any repayments.
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