Surely you’ve heard of the Butterfly Effect – it’s a tenet of Chaos Theory that says a small change in one part of a complex system can have large effects elsewhere. To quote my favorite fictional Chaostician, Dr. Ian Malcolm from the Jurassic Park film, “A butterfly can flap its wings in Peking and in Central Park you get rain instead of sunshine.” So what do a great Spielberg film, cool math and dinosaurs have in common with student loans?
Simply this. In the 21st century, we are truly a global economy. If a fluttering Lepidoptera can set off a weather change, what can a major blip like a recession or student loan crisis in one part of the world do in another? Since 2008, we’ve basked in a recession, housing market slump, plague of unemployment and a host of other economic ills including our student loan crisis.
But the US is not an economic island and we are much larger than a butterfly, so the ripples carry much more heft. Not that we are to blame for the economic crises in other nations, but it shouldn’t be shocking that when one global force experiences hardship, so too will others that interact in our sphere. In that vein, it’s not surprising that other countries including the UK, Japan and Australia are experiencing economic low points that include student loan problems.
Student Loans in the United Kingdom
The UK has a much smaller total student loan balance than does the US which is not surprising based on lower population. Their total outstandings are £40.3 billion. The UK system differs quite a bit from ours in that HRMC (the tax system) collects student loan payments via payroll withholdings that will make up 9% of income once the debtor reaches a certain income threshold.
For 2012, that threshold is £16,365 (roughly $25,500) before payments start. Because they’re collected through the tax system, the default rate for UK residents is low, but for those who are educated in the UK and then relocate elsewhere in the EU (European Union) including students who are from other countries in the EU, the default rate is a shocking 45%! £347 million (US $530 million) is in arrears and the UK is struggling to recover payments from students who leave England with a degree but try to leave their debt behind.
Student Loans in Australia
Australia’s student loan system – which we’ve written about before – has recently gone from fairly forgiving to much less so. Formerly, borrowers had 35 years to pay back loans, but now it’s dropped to 15. Another issues has been expatriates who have fled the country and have skipped out on their loans altogether. More than half a billion dollars is owed by debtors no longer residing in Australia of which around 15% are skimping on their debt payments.
Those seriously delinquent on student loans face arrest at the border. This comes after the repayment period has been cut in half and repayment requirements raised setting off numerous student protests about the financing shake-ups. Seems that many nations are experiencing similar repayment challenges that the US has been saddled with for awhile!
Student Loans in Japan
In Japan, an increasing number of student loans totaling around ¥476 billion ($5 billion US) are in arrears. This has caused the Asian nation to take harsher steps when it comes to lending determinations. In an effort to prevent future defaults, Japan has begun denying loan renewals to current student borrowers based on poor academic performance.
Beginning in 2012, those under-performing were issued warnings and then this year roughly 600 students were denied loan renewals. Default has been blamed on the economic slump and ongoing employment issues in Japan.
The economic upheavals that have plagued the US over the past five years are certainly much more significant than the flutter of an insect wing and there’s no doubt that what happens with our national finances impacts other nations. So it shouldn’t be a surprise that ours is not the only country facing student loan dilemmas. To make sure your student loans stay on track, try Tuition.io’s free student loan tool to manage and optimize your debt! You can see all of your loans, whether public or private, and no matter the lender, in our easy to use interface!
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