Headlines about the cost of college in the US — and the debt that goes along with it — can be depressing. The cost of a college degree has doubled since 1989. There are more than 44 million debtors who owe more than $1.5 trillion. And over 10% of borrowers are delinquent or defaulting on their loans.
With those scary statistics, you may find yourself wondering how other countries handle the cost of higher education. Are we the only country dealing with this problem? Surprisingly, ballooning costs and debt aren’t just a domestic problem.
So how does the US stack up compared to the rest of the world?
University Costs by Country
The Organization for Economic Co-Operation and Development (OECD) publishes an annual report which includes estimated average tuition costs from various countries around the world. In the chart below you’ll see the average annual tuition for a bachelor’s degree (or equivalent) at a public university in 2015/16:
The US is ranked near the top when it comes to expense, but there’s one country where tuition is higher: the United Kingdom. And just like us, their tuition costs are on the rise. According to OECD data, tuition in the UK increased from $9,019 for the 2014/2015 school year to $11,797 in the 2015/2016 school year, a 30% increase.
While university tuition in many places is increasing, there are still a number of countries that offer free tuition. This includes Denmark, Estonia, Finland, German, Norway, Slovak Republic, Slovenia, and Sweden.
The Student Debt Issue
In the US not only is the cost of college on the rise, so is our student debt. The average student leaves college with $37,172 in debt, $20,000 more than they borrowed 13 years ago.
Under our current student loan system, the standard repayment plan for a federal loan is 10 years, though there are different income-based repayment options. Graduates are required to make monthly loan payments, which are often very expensive relative to their salary. This may, in part, explain why 10% of borrowers are delinquent or in default.
We’re not the only country dealing with student debt. Other countries have their fair share of student debt issues. Again, the US doesn’t rank the highest, the UK does:
How do other countries around the world handle the debt load? We’ll look at two examples: the UK, which has the highest tuition costs, and Sweden, which has free tuition.
Student debt is making headlines in the UK as student debt balloons. Graduates are currently facing over £50,800 (approximately $64,500) of debt. However, their repayment structure looks quite different.
University graduates begin loan repayment once they earn over £2,143 per month. Each month that they earn over that threshold, their loan payment will be 9% of the amount earned above the threshold. For example, if they earn £2,500 per month, their loan payment will be £32 for the month. That can keep loan payments affordable for borrowers as they begin their careers.
Interest on the loan is the inflation rate plus up to 3%, depending on your income. The current inflation rate is 3.3%, which puts the maximum interest rate at 6.3% total.
With student loan payment amounts directly tied to earnings, the system for paying your loans is simple: your payment is deducted directly from your paycheck. If, after 30 years, you haven’t finished repaying your loan, the balance is written off and you’re not required to continue making payments. By one estimate, as many as three-quarters of borrowers won’t finish paying off their loan balance before that 30-year mark.
Though tuition is free in Sweden, students are still graduating in debt. 85% of Swedish students graduate with debt and the average debt in 2013 was around 124,000 Swedish Krona ($19,000).
Though Swedish students graduate with a surprising amount of debt, given that university tuition is free, the monthly loan payment is often manageable. Borrowers can take up to 25 years to repay their debt, and they can take advantage of an extremely low interest rate (in 2018 it was 0.13%). Their loan payments also increase by 2% each year, which would hopefully coincide with increasing salaries.
With this extended loan repayment period, loan payments may be easier for some borrowers to make, especially in the beginning of their career.
High tuition costs and rising student debt aren’t problems that only the US is facing. Higher education is an expensive endeavor for many students around the world.