Student Loan
From OneBuckWiki
Student loans are loans offered to students to assist in payment of the costs of professional education. These loans usually carry a lower interest rate than other loans and are usually issued by the government. Often they are supplemented by student grants which do not have to be repaid.
Contents |
Student loans in the United States
While included in the term "financial aid" higher education loans differ from scholarships and grants in that they must be paid back. They come in several varieties in the United States:
- Federal student loans made to students directly: No payments while enrolled in at least half time status. If a student drops below half time status, the account will go into its 6 month grace period. If the student re-enrolls in at least half time status, the loans will be deferred, but when they drop below half time again they will no longer have their grace period. Amounts are quite limited as well.
- Federal student loans made to parents: Much higher limit, but payments start immediately
- Private student loans made to students or parents: Higher limits and no payments until after graduation, although interest will start to accrue immediately. Private loans may be used for any education related expenses such as tuition, room and board, books, computers, and past due balances. Private loans can also be used to supplement federal student loans, when federal loans, grants and other forms of financial aid are not sufficient to cover the full cost of higher education.
Federal Loans
Federal student loans in the United States are authorized under Title IV of the Higher Education Act as amended.
The first type are loans made directly to the student. These loans are available to college and university students and are used to supplement personal and family resources, scholarships, grants, and work-study. They may be subsidized by the U.S. Government or may be unsubsidized depending on the student's financial need.
Private Loans
These are loans that are not guaranteed by a government agency and are made to students by banks or finance companies. Advocates of private student loans suggest that they combine the best elements of the different government loans into one: They generally offer higher loan limits than direct-to-student federal loans, ensuring the student is not left with a budget gap. But unlike to-the-parent government loans, they generally offer a grace period with no payments due until after graduation. This grace period ranges as high as 12 months after graduation, though most private lenders offer six months.
Student loans in Canada
Canadian citizens, permanent residents of Canada, and protected persons (including convention refugees) are normally eligible for loans provided by the federal government, through the Canada Student Loans Program (CSLP), in addition to loans provided by their province of residence. Loans issued to full-time students are interest free while a student is in full-time studies, (as long as the maximum number of eligible weeks has not been reached) - the interest is paid by the government during the interest free period. When they are no longer in school, the loans immediately begin to accumulate interest. Repayment usually begins after 6 months at which time the accumulated interest is added to the loan amount. In most cases, the loan(s) must be repaid within 10 years after completion of studies.
Funding is available for part-time students through the CSLP (provincial student loans are not available). Part-time students must make interest payments while in study and begin payments of principal and interest when they cease to be a part-time student. Grants may supplement loans to aid students who face particular barriers to accessing post-secondary education, such as students with permanent disabilities or students from low-income families.
Students must apply for the Canadian and provincial loans through their provincial government. The rules for what determines your province of residence vary, but normally it 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 most cases, the province of residence is the province one lived in before becoming a post-secondary student.
Canada Student Loans (CSL) of up to $210 per week of full-time study or 60% of the student's assessed need (the lesser of these) can be issued per loan year (August 1–July 31). Loans issued through provincial programs will normally provide students with enough funding to cover the balance of their assessed need. Part-time loans of up to $4,000 can be made, but a student cannot be more than $4,000 in debt on part-time loans at any one time. All Canadian students may also be eligible for the Canada Millennium Scholarship Foundation Bursary (CMS Grant), and other grants provided by their province of residence.
For example, students in British Columbia may be eligible for a maximum of $14,300 combined loan and grant funding per year.
Student loans in the United Kingdom
British undergraduate and PGCE students can apply for a loan through their local education authority (LEA) in England and Wales, the Student Awards Agency for Scotland (SAAS), or their local education and library board in Northern Ireland. The LEA, SAAS, or education and library board then assesses the application and determines the amount that the student is eligible to borrow, as well as how much tuition fees, if any, the students' parents must pay. The family's 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 in England and Wales, with only the final 25% being means-tested (taking the total available up to as much as £4,000). There is also extra money (currently roughly another £1,000) if you go to university in London, where it is deemed the extra cost of living necessitates a higher loan. Scotland has a slightly different assessment method where more of the loan is means-tested with a minimum loan of only £840. However much you get, 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 students have completed their course and are earning £15,000 a year (£10,000 until April 2005). The interest rate is updated annually and is tied to inflation (currently 3.1%), making the loan interest-free in real terms. The loan is normally repaid using the PAYE system, with 9% of the graduate's gross salary over £15,000 automatically being deducted to pay back the loan. There is no particular schedule for clearing the debt, but, if it has not been cleared 25 years after repayment began, or the student turns 65 years old, the remaining debt will be cancelled. For students beginning courses before 1998, the arrangements for repaying and deferring are different. Although Scottish students have their tuition fees covered by the SAAS during their time of study, much of this is actually repaid in a Graduate Endowment.
The Higher Education Act 2004 will make significant changes to the loans system in England, Wales and Northern Ireland from 2006. Upfront tuition fees will be abolished, with the fee being added to students' loans for them to pay back after their course is finished. However, instead of the tuition fee being fixed at around £1,150 for all universities (which, due to means-testing, not all have to pay), universities will be able to charge variable fees of up to £3,070. For students who have already started their courses and, as such, are still paying the upfront fees, can now add these fees to their loans if they want. Critics claim these top-up fees will create tiers of "expensive" and "cheap" universities and make university financially inaccessible to many students. As a result, there have been national demonstrations and protests by students' unions.
Student loans in 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.
Student loans in Australia
Higher education fees in Australia are charged to all students, but Australian citizens and (with some limitations) permanent residents[1] are able to obtain interest free loans from the government under the Higher Education Loan Programme (HELP) which replaced the Higher Education Contribution Scheme (HECS). Most students are Commonwealth supported, which means the Commonwealth Government pays a contribution to the fees and students are able to defer payment of the remainder of the fees, which for Commonwealth supported students are called the "student contribution". Some domestic students are full fee-paying (non-Commonwealth supported) and while they are able to obtain subsidised loans from the Government up to a lifetime limit of $100,000 for medicine, dentistry and veterinary science programs and $80,000 for all other programs, they receive no other direct government contribution to the cost of their education. Overseas students are charged fees for the entire cost of their education and are ineligible for any loans from the Commonwealth.
HELP is jointly administered by the Department of Education, Science and Training (DEST) and the Australian Taxation Office (ATO).
Student loans in 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. This criteria has caused anger among student bodies who point out that it excludes many self-sufficient adults from help due to parental income levels, and also that by age 25 most people have completed tertiary education.
Loans are repaid by a 10% tax surcharge on income, once the student graduates and is employed. There is a minimum income level, roughly equivalent to the unemployment welfare benefit payment rate, that is exempt from assessment.
From 2001, all full-time students have been exempt from interest while studying, and from 2006 all borrowers resident in New Zealand have been exempted interest.
Loan recipients who leave New Zealand are assessed on their worldwide income for repayment purposes, with a minimum annual payment being required. Loan repayents are suspended on request for those on no /low income overseas, however interest still accumulates. From March 22nd 2007, the government is introducing a three year 'loan repayment holiday' for those overseas. In practice this is a uniform extension of the previous ability to waver repayments until a later date. As before interest accumulates during this period.
In recent years, large student loan debts have meant that a majority of graduates have sought higher paying overseas work instead of remaining in New Zealand. This has led to skill shortages ('brain drain') in some professions as local employers have been unwilling or unable to match international salaries. Medical-related professions have been particularly hard hit due to recent graduates, having high loan debts, and health employers, having tightly controlled government funding.
The loan system has changed and modified since its inception in 1992. Initially it provided bulk payments to students and charged lower than market interest rates from initial drawdown. This led some entrepreneurial students to use this money for investment purposes benefiting them but leading to a widespread perception of student excesses. In 2001 a growing debt mountain caused the new Labour government to stop interest payments while students studied and in 2006 they rode to election on the promise of stopping interest for all those remaining in New Zealand.
There is a lot of anger and frustration over the NZ loan system, especially from early generations of borrowers (1992-2001). These students consider themselves the 'guinea pigs' of the loan system, who were charged compounded interest from initial drawdown and then watched as future generations had interest removed completely. This generation suffered from a lack of education about the consequences of debt, and a lack of role-models to look to for advice. It is no coincidence that some of the hardest hit by previous versions of the loan system were from the poorer families the system was suppossed to 'enable'.
The student loan system has succeeded in turning New Zealand into a highly educated economy. However it has also led to a capitalist minded workforce who frequently leave their home country in order to pursue the better career and loan repayment options available overseas.
Who's Online Right Now: Guests: 210 Registered: 0 ()
Categories: Home | Money