What the U.S. Could Learn from Other Countries’ Student Loan Systems
Have you ever felt crushed under the weight of your student loans? You’re not alone. One borrower shared that after 13 years of repayment, they finally paid off their law school debt—only to discover they had paid $127,000 in interest on top of the principal. They borrowed $95,000 for law school and ended up paying just over $222,000 between 2012 and 2025. Years of lean income and an income-based repayment plan (which they called “such a scam”) meant that interest kept compounding, making the journey feel endless.
But not every story is the same. Another student managed to pay off their loans in 7 years through strict budgeting and extra payments, yet they still felt the burden of interest stacking up. Whether it takes 7 years or 13, many borrowers feel trapped in a system that compounds their stress as much as their debt.
What if student debt didn’t have to be this way?
Around the world, countries have taken different approaches—income-based repayment, tax-collected plans, or even tuition-free programs—that offer alternatives to the U.S. model. Let’s explore how these systems work and what lessons they might offer. Which approach do you think could give you—or someone you know—a fairer shot at financial freedom?
The United Kingdom: Income-Contingent Repayment
In the U.K., students borrow money for tuition and living costs, but repayment works very differently from that in the U.S. Instead of fixed monthly bills, borrowers pay back 9% of any income above a set threshold. If you’re not earning enough, you pay nothing. After about 30 years, any unpaid balance is forgiven.
Lesson for the U.S.: A truly income-based repayment system prevents borrowers from defaulting and eliminates the need for aggressive debt collection.
Australia: HECS-HELP and the Tax System
Australia’s HECS-HELP program makes loan repayment nearly invisible. Graduates don’t send payments to loan servicers; instead, repayments are deducted automatically through the tax system once income crosses a threshold. This automation means virtually no defaults, since payments rise and fall seamlessly with earnings.
Lesson for the U.S.: Linking repayment to the tax system would reduce administrative confusion and eliminate delinquency caused by missed or mismanaged bills.
Germany: Free Tuition as a Public Good
At public universities in Germany, tuition is free or nearly free. Students still need to cover living costs, but loans are far smaller and more manageable. The philosophy is simple: higher education benefits society at large, so the state should carry the burden of tuition.
Lesson for the U.S.: Eliminating or drastically reducing tuition would cut student debt at the source, though such a shift would require major policy changes and increased public funding.
Sweden: Long-Term, Low-Interest Loans
Sweden provides government-backed loans not just for tuition but also for living expenses. Repayment periods can stretch up to 25 years, with interest rates set very low. Payments are tied to income, but the system is less aggressive than the U.K.’s, giving borrowers breathing room.
Lesson for the U.S.: Extending repayment timelines and lowering interest rates would make student debt less burdensome over time.
Canada: Forgiveness and Flexibility
Canada’s federal loan program includes built-in repayment assistance. If income is too low, borrowers can have their payments reduced or paused. Some programs also allow forgiveness after 10 to 15 years. While not as streamlined as Australia’s system, it offers safety nets that ease the weight of debt.
Lesson for the U.S.: Expanding automatic forgiveness programs could help struggling borrowers avoid decades-long repayment struggles.
New Zealand: Interest-Free Loans
New Zealand stands out by eliminating interest entirely for residents living in the country. Borrowers still repay loans through income-based systems, but without interest, debt does not balloon over time. This policy helps graduates focus on repayment rather than on compounding balances.
Lesson for the U.S.: Interest-free loans could dramatically reduce the psychological and financial burden of borrowing.
Nordic Countries: Education as a Right
In Denmark, Finland, and Norway, public universities charge no tuition. Students often receive stipends or grants to cover living expenses, making loans minimal. Education is treated as a public right rather than a personal financial investment.
Lesson for the U.S.: While radical in the American context, these models highlight how prioritizing education as a public good changes the debt conversation entirely.
Where the U.S. Could Go From Here
No single system can be copied and pasted into the U.S. context, but the lessons are clear:
• From the U.K. and Australia: Income-based repayment collected through payroll or taxes could prevent defaults and reduce administrative headaches.
• From New Zealand: Interest-free loans keep debt manageable without erasing accountability.
• From Germany and Scandinavia: Free or low tuition reduces debt at the root.
• From Canada: Built-in forgiveness programs provide safety nets for borrowers.
The U.S. has long approached student loans as individual financial products rather than as a shared investment in the country’s future. By learning from other nations, it could build a system that balances personal responsibility with societal benefit—and finally ease the crushing weight of debt for millions of Americans.