What Joe Biden Can Learn About Student Debt From the World

On his first day in office, President Joe Biden directed the Department of Education to extend the current freeze on student-loan payments until at least September.

But Democrats are pushing him to go further — and to take inspiration from abroad.

Dismayed that educational debt relief wasn’t mentioned in his $1.9 trillion stimulus proposal, members of Biden’s party have pushed him to use executive action to forgive $50,000 in student debt early in his presidency. Meanwhile the Democrats’ left flank loves to cite Nordic countries — with free college and generally lower student-debt levels — as policy models.

But some experts say the incoming president might have better luck looking elsewhere.

“The U.S. has a lot to learn from Australia and England,” said Lorraine Dearden, a professor of economics and social statistics at University College London who co-authored a recent study on the subject.

Like the U.S., both countries charge for higher education, and many of their students rely on student loans. But a few major differences make borrowing easier to manage.

One of the biggest: the way loans are structured. In the U.S., student loans function like mortgages. Borrowers have a fixed monthly payment over a set period of time.

But in England and Australia, loan repayments are dependent on a borrower’s income. Repayments only start once a borrower has reached a certain income threshold — and stop if a borrower loses a job.

The duration of the loan is variable, so loans can take longer to pay off than in the U.S. But because repayments are tied to employment, they tend not to dominate graduates’ job choices and financial lives as they can in the U.S. (Of course, the U.S. does have some income-contingent repayment plans. But these are complex and do not form the organizing principle of debt in the country.)

With that in mind, here is how Australia, the U.K. and several similar English-speaking countries handle educational loans, with insights from local advisers on how student debt fits into their clients’ financial lives.

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