Machlin Fink

A few weeks ago we briefly wrote about the shortage of talent that businesses need and rising educational costs associated with that. Today, we take an in depth look at student debt around the globe and how countries tackle the growing problems that are associated with student loans .

Regardless of location there seems to be a few trends that most regions have in common. The first is that governments are increasingly reluctant to provide funding for universities. This has been highly publicized in the United States where just over a year ago the aggregate student loan debt reached one trillion dollars. Even China, who’s government is active in the investment needed to continue their global rise, has funded a smaller percentage of their students education – albeit while more and more of their population are attending universities. This leads to the second (and obvious) commonality which is an increase in student debt. The average student in the United States will leave campus with $26,000 of debt. In Canada this number is $27,000 and in England it is £26,000. The number of jobs being created is certainly not keeping up with the number of graduates flooding out of universities each year which only exacerbates ones problem in paying back these large sums of money, especially when interest starts building on the loan.

Where countries differentiate themselves on this topic is how students borrow and how they repay. England just introduced a plan where a person does not have to begin repaying their student loan debts until they are earning more than £15,795 annually. A similar approach is slated to take effect in the United States in 2014 and taking up a career such as a teacher can make one eligible for certain loan forgiveness programs. While these provisions do not seem like much the Canadian government has made no concessions for the youth of their country graduating in debt. College students have taken to demonstrations that have even led to a number of violent incidents.

China has one of the more lopsided systems where students from rural areas have to pay more than those who live in cities. This is a daunting task when the average yearly tuition in China is ¥40,000 and the average rural family brings in about ¥3,000 annually. Germany, long revered for their aptitude in higher education policy, takes a different approach where a student pays no interest on their educational loans. They also have in place one of the most progressive debt forgiveness programs that allows for a certain amount of forgiveness for completing their studies in a prescribed period of time or finishing in the top third of their class.

While educational policy is much more complex and requires a deeper understanding than what is listed here it is largely conceded to be an important factor of a countries economic prospects. It is no accident that an emerging China is sending four times the number of people to universities than it did just a decade ago. There is also something to be said about the way Germans educate their population and their low unemployment rate of 5.4 percent. While many other macro factors play into these statistics, the fact cannot be ignored that a more (and easier) educated population produces far superior economic results. Unfortunately, many financing systems across the world are making obtaining higher education ever more difficult.