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Understanding regional differences in study loans

Katie Schenk - October 22, 2019

Are you battling to secure a loan in your home country to attend an international master's programme? Watch this short video to see how these students overcame their funding difficulties. 


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Student loan debt in the United States continues to reach shocking peaks. Every year, there’s at least one major story in the news regarding the current state of debt attributed to higher education. Current estimates of US student loan debt sit at US$ 1.5 trillion. That figure is spread out over 44 million Americans.

But, this isn't universal. Different systems of educational financing have created differing norms throughout the world.

Where you’re from (and the way study debt is handled there) will impact your view on educational loans.

Student loans in the United States

As an American, you could walk into just about any bank in the United States and request a student loan. But, the bank manager would raise a skeptical eyebrow while scrutinising your paperwork. 

Why go to a private bank for such a loan when it’s generally the business of the government to finance college studies?

The US Federal government offers a variety of loans to American students. While the list of products isn’t endless, each one is slightly different. 

Students apply for and are given loans based on their income, their parents’ incomes, tuition and related fees, and anything else that affects finances. Loans are dispersed to schools in most cases (though not all). And, after graduating, students have 10 years to repay the government for their education.

This process works alongside scholarships and fee reductions offered at many colleges and universities through the financial aid department. For most American students, the process and outcome are ingrained; that’s the way it works. 

Surprisingly, many American students still qualify for federal government loans even when they choose to study overseas.

The American loan system isn’t universal

For all the ruckus caused by the student loan debt in the world’s largest economy, it’s hardly a universal problem – even when the government provides the financing for higher education.

Australia has become the poster child for student loan success in recent years. Australian students essentially tick a box to receive their loan, and it’s more or less handled. 

Once that student’s salary reaches roughly US$40,000, he or she will begin to repay the government. Loan payments are automatically deducted from salaries, and the amount is usually around the five percent of income mark. The more that graduate earns, the faster the loan is repaid and the process continues until the debt is paid in full.

That’s not to say the Australian system is without flaws. Consider the graduates that never really crack the minimum earnings to repay their loan. And then there are those that seek international employment where the government has no ability to deduct repayments.

In France, all (French) students pursuing higher education are guaranteed loans of EUR 15,000. Students may be eligible to apply for more, but this amount is on the cards for everyone. The government also provides grants to students from eligible categories provided they can also demonstrate need.

Swedish and German public universities are generally tuition-free (as long as you speak the language) which is, in itself, a major saving. 

Still, living expenses and non-academic learning experiences cost plenty of money and loans are a common means of paying for them. Loans for these expenses may come from government or private banks, depending on the financial capacities of the students themselves.

Not all governments subsidise education

Some governments just aren’t in a position to subsidise student loans (even if they arguably need more college and technically trained graduates).

South African education loans for university

In South Africa, university students almost always turn towards private banks to finance shortfalls in their education budget. There is a National Student Financial Aid Scheme (NSFAS) loan, but it doesn’t have the resources to promise money to everyone. Roughly 460,000 students benefited from these loans in 2018, though it’s worth considering this is more than double the number of students assisted when the organisation formed in 2009.

A benefit of procuring an NSFAS loan is that up to 40% of it can be forgiven for students that do well in class. Another perk is that repayment rates are calculated based on income with minimum and maximum caps.

But, it’s the private banks that handle most of the student loans in the country – and they’re not limited to South African nationals. International students can qualify, though that ever important co-signer is required.

Tuition is much lower by international standards, however; the cost for a year of undergraduate study usually doesn’t surpass US$2000. Living expenses aren’t included in that figure, but they're certainly lower than you would find in North America or Europe. 

Still, it’s a stretch for many Africans (including South Africans) to pay these fees without a loan. Sadly, it’s sometimes difficult for students to find co-signers that meet the banks’ minimum requirements for income and residency.

Indian education loans for university

You’ll find a similar situation in India where student loans absolutely require a co-signer. And that’s just the beginning of the student loan crisis. When loan amounts exceed a certain minimum (roughly US$ 10,000, though it varies by bank), collateral is also required in most cases. Families wishing to go this route will be asked to put their house on the line – and therefore decide which child will be able to attend university.

Sure, that is a dire picture, but it’s a reality for a number of academically deserving (would-be) students who just don’t have the financial backing they need to complete their education. And, as you can imagine, the situation becomes even more complex for graduate level studies.

Securing loans for education, though, is clearly complex wherever you are. There is no such thing as a universal standard for financing study. And regional differences play a role in the products any potential student can expect to secure - unless they turn to a cross-border lender like Prodigy Finance

Parent of Prodigy Finance borrower Sudhir Raina quote

Are you looking for an international study loan?

Prodigy Finance is ready to help. We offer cross-border loans to help students fund their dream degree at top international universities. 

Prodigy Finance Ltd is authorised and regulated by the Financial Conduct Authority.

Post updated for accuracy and freshness on October 22, 2019. Originally published on July 11, 2016.


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