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Student Loan Programs

By: EconomyWatch Content Date: 1 December 2009

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nation. The fundamental nature and purpose of such programs remain similar universally. Government education loans are sanctioned to financially weak students on the basis of merit, whereas private student loans are offered on the basis of a student’s credit rating.

Student Loans Programs Worldwide

Some recognized government student loan programs across the world are:

United States of America

Federal student loan programs, such as Stafford Loan, PLUS Loan and Perkins Loan are the most popular sources of education financing in the US. These loans accompany very low interest rates and flexible payment options, including provision of payment grace period. The federal government bears the burden of interest on such loans, while the student studies to get a degree, until the termination of the grace period.

Canada

The Canadian government provides Canada Student Loans to post-secondary, full-time and part-time students who have financial need. The Canada Student Loans Program (CSLP) provides 60% of the evaluated need, up to $210 per week. The remaining 40% may be acquired by a student as separate territorial or provincial student loans.

According to government reports, about 4.3 million students received student loans, since the CSLP was established in 1964. In 2006-2007 alone, the CSLP funded 345,000 students, awarding funds worth $141.8 million.

Some important features of the Canada Student Loan Program are:

· Eligible for interest deduction from income tax, up to 17% of the interest value compounded annually.

· Maximum loan repayment period of 15 years (10 years for students with permanent disabilities).

· Monthly repayment amount to a maximum of 20% of the family income.

China

The Chinese government supports higher education through its Government Subsidized Student Loan Scheme (GSSLS). The scheme’s general objectives are:

· Facilitating expansion of higher education

· Cost sharing

· Easing financial burden of the nation by supporting the expenses of students pursuing higher education

· Improving equality of admission to higher education

· Increasing human capital

Important features of the government subsidized student loan scheme are:

· Intended for students with family income below the lowest living standard in the nation.

· Four year repayment period, for covering full principal amount and 50% of the accrued interest.

· Granted on the basis of a student’s individual credit, and does not require any guarantor.

Despite reasonable payment terms, a student must apply for student loan programs only after exhausting other sources of funding, such as scholarship, grants and personal savings.