An International Final Four: Which Country Handles Student Debt Best?

Our panelists agreed that the best student loan repayment system is one that is simple, that is based on students’ incomes, that spreads loan payments over longer periods and that’s able to collect payments automatically through the tax system.

Such a system is a far cry from what’s in place in the United States. In Australia, student loan default is rare. In the United States, the number of borrowers in default rises every year, even if the default rate falls, because defaulted borrowers are unlikely to return their loans to good standing. Beyond the individual pain this can cause, it has negativeconsequences for the economy.

In its recent spending bill, Congress passed a one-time $350 million forgiveness fund to smooth problems for some borrowers. The government has made strides over the years with income-based repayment plans, but the plans are so complicated that Mr. Chapman, our panelist from Australia,once tried to fill out applications as an experiment and “couldn’t do it.”

An International Final Four: Which Country Handles Student Debt Best?
An International Final Four: Which Country Handles Student Debt Best?

Democrats and Republicans share blame for a system that seems broken, and major reforms don’t seem near. Maybe the first step is acknowledging that possible ideas for improvement don’t stop at the border.

We’re interested in what you have to say — whether you’re an American, or whether you’ve attended college abroad. In the comments section, tell us the best or worst feature of your country’s system. And what advice would you give Americans?

The judging panel, which includes us:

Nicholas Barr, professor of public economics, London School of Economics

Sandy Baum, fellow, Urban Institute (United States)

Bruce Chapman, professor of economics, Australian National University

Rohit Chopra, senior fellow, Consumer Federation of America

Lorraine Dearden, research fellow, Institute for Fiscal Studies (Britain)

Kevin James, founder and chief executive, Better Future Forward (United States)

Bridget Terry Long, Saris professor of education and economics, Harvard Graduate School of Education

Judith Scott-Clayton, associate professor of economics and education, Teachers College, Columbia University

Alex Usher, president, Higher Education Strategy Associates (Canada)

Matthew Chingos is director of the Urban Institute’s education policy program. Follow him on Twitter at @chingos. Susan Dynarski is a professor of education, public policy and economics at the University of Michigan. Follow her on Twitter at @dynarski.

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