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Why the Australia Student Loan System May Have the Right Idea

In the Australia Student loan program is different significantly from that of the U.S., and those distinctions are clear.

For instance, U.S. student loan users who opt for the typical, 10-year repayment plan will see their monthly payment remain the same throughout the term of their loans even if they earn. It’s basically the mortgage payment.

However, that is not the case in Australia’s 留学生贷款 system where the income of the borrower determines the repayment.

How do student loans in Australia function

Under the Australian student loan system, the government-administered Higher Education Loan Programme (HELP) provides interest-free loans to university students. Instead of charging interest on student loans rates the balance of the loan is calculated based on costs of living rises.

Under HELP the borrower does not need to make repayments until they reach the threshold of a certain amount which is adjusted every year. The repayment for the academic 2020-2021 year starts with 1% of the borrower’s income when it reaches an amount of 46620 Australian dollars (about $33,300).

The amount of the loan increases according to how much the borrower earns. In addition, there are additional thresholds for income, ranging from $165,000 to the amount of 136,740 Australian dollars (about $98,000) and beyond, after which the repayments are determined at the highest 10% of the income. This means that Australian university graduates that get lucrative jobs straight out of college are able to pay off their debts fast while those whose income remains low will have an easier time repaying their student loan obligation.

This means that an Australian college graduate is able to pay off their student loan debt in eight or 12 years as per an report from the year 2018. New York Times report. Within the U.S., the average length of time to pay off student loan debt is 17 to 20 years, based on factors like:

Your balance
Repayment plan
The location where you reside while making payments

Imitating similar to Australia students loan program of the U.S.

There’s a crucial point to be aware of regarding how the U.S. student loan system The reason is that when the president Lyndon B. Johnson signed the Higher Education Act of 1965 -that included, among other things, offered financial aid for students — fewer students went on to college and tuition was less expensive than it is now.

Johnson was a good man when designing these educational programs but he certainly couldn’t have imagined how expensive college would become within the next few years. While it hasn’t been revised from the time it was first passed but the scale of the credit card debt problems is a sign that the need for more changes. (For more information on the magnitude of U.S. school debt, take a look at the student debt calculator.)

In actual fact, the differences among Australia and the U.S. and Australia in the costs and the size of higher education are an obstacle to the introduction of the Australian system to. In Australia taxation is an enviable portion of the gross domestic product of the country as well as Australia additionally has smaller population that it does in United States does.

“To launch a program similar to the one in Australia’s HELPin America will have a significant economic impact due to the sheer size of the population as well as the huge number of institutions of higher education,” said Michelle Hutchinson who is a personal finance communications executive and a graduate of Macquarie University in Sydney, Australia.

Imitating an equivalent system to Australia loans for students that is in place U.S. could lighten the burden for borrowers, however it will require a massive investment of capital to launch programs such as HELP.

“The economy will benefit , but it will be in the medium to long term increase if that were to happen,” Hutchinson said.

Members of Congress and presidential candidates to the White House in the U.S. have been increasingly campaigning on ideas to cut down costs for college as well as make loans for students more easy to pay back. Some have proposed that all public universities be free or removing the student loan debt that is currently in place. It will be interesting to see what happens if any of these proposals are actually implemented, or if they are a step in the right direction. U.S. can move to an more Australian approach to dealing with student loans.