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Germany made international news last week when they decided to eliminate college tuition entirely (before this, it was less than €1,000– the equivalent to $1,300– per year). Meanwhile in the United States, the average per-year tuition cost was $8,655 for an in-state 4-year public college, $21,706 for an out-of-state 4 year public college, and $29,056 for a private 4-year college. The average American college student will graduate with more than $27,000 in debt, and college costs in the U.S. have gone up more than 1100% since 1978 with little sign of leveling off.
In light of Germany’s actions, we decided to highlight 5 countries whose approaches towards financing higher education put ours to shame.
- Germany
Nearly all college students in Germany (99%) attend public universities, funded by the government. These schools were free up until 2006, when the German government decided to allow them to charge up to €1,000 per year in tuition fees to shift some of the financial burden onto students. The ensuing 8 years have seen mass protests (in the German state Hesse, 70,000 signatures were gathered), many politicians voted out of office, and as of last week, every German state has reverted to the free tuition model.
Germany, which has the 4th largest economy in the world (behind the US, China and Japan), once again has the government pick up the full tab for its citizens’ higher education. Gabrielle Heinen-Kjajic, the minister for science and culture in Lower Saxony, said: “We got rid of tuition fees because we do not want higher education [that] depends on the wealth of the parents.” What a novel concept.
- Denmark
Denmark’s government provides university education completely free for its citizens as well as those of any country in the European Union.
It gets better: Denmark’s government also provides monthly stipends to students for cost-of-living expenses (rent is less expensive in Denmark but food, transportation and other goods tend to be slightly more expensive as compared to the United States according to Expatistan and Numbeo). Any student who needs additional money can get a low-interest government loan (Denmark’s parliament sets the interest rate).
- Australia
Australian universities charge tuition and many students borrow money to attend school; however, Australia has a few tricks in place to help students manage debt:
First, tuition varies based on your major. Majors that lead to a higher future income, like medicine, law, and business, cost more.
Second, students may pay as much of their tuition up front as they or their families can afford, and get a 10% discount. Any tuition costs not paid up front will be paid back by the student based on their future income (this system is known as HELP).
This is where it gets interesting. For one thing, Australian graduates don’t pay back a cent until their income reaches a certain level (around $51,000 per year). Then they pay back between 4% and 8% of their income per year. However, if their income ever falls below the minimum level, they do not have to pay anything back until their income recovers. The most important part: no fees or interest accumulates on their debt during years where they earn below the $51,000 income threshold.
It should be noted that Australia’s government is cutting its education budget, and as a result, Australian universities are expected to raise tuition at least 30%. The interest rate on loans is also expected to be tied to the 10 year government bond rate (6%), which is higher than the current interest rate tied to the Consumer Price Index (currently 2.9%).
- New Zealand
Staying Down Under, Australia’s neighbor New Zealand spends a greater percentage of their GDP (which essentially represents the size of a country’s economy) on education than any country in the world, which indicates they have concluded that education is a public good and is therefore worth government investment.
Like Australia, New Zealand allows graduates to repay their loans based on how much they earn. And in 2006, New Zealand’s government completely eliminated interest on student loans for all future students, meaning students will continue to pay back their loans based on their income level but won’t accrue interest. In the United States, the federal government generated $41.3 billion in student loan profits in fiscal year 2013, most of which is due to interest accumulation.
As in Denmark, students in New Zealand also receive an allowance from the government, which does not need to be paid back.
- England
Almost all of England’s universities are public and tuition is around £6,000 per year (which is a little less than $10,000 per year) — and no university can charge more than £9,000.
Students repay their debt on an income-contingent basis, meaning they are not required to make a payment until their income exceeds £21,000 (around $33,000). Students pay back 9% of any income over that threshold – and their payments are put on hold if their income drops below £21,000 per year.
So even though many in England are upset that higher education tuition has tripled in recent years, theirs is still a system that is currently better than the United States.
