History of Student loan in Timeline
Student loans are designed to finance post-secondary education expenses like tuition, books, supplies, and living costs. They often feature lower interest rates and deferred repayment options while the student is in school. However, they also typically have stricter regulations regarding renegotiation and bankruptcy compared to other loan types. These regulations vary significantly across different countries. This article provides a comparative overview of student loan systems in several major countries, highlighting their key differences and unique characteristics.
1969: Hong Kong Introduces Student Loan Scheme
In 1969, Hong Kong introduced a student loan program to support full-time students at the Chinese University of Hong Kong and Hong Kong University.
1976: Hong Kong Expands Student Loan Scheme to Polytechnic
Hong Kong's student loan scheme was broadened in 1976 to encompass full-time students at the Hong Kong Polytechnic.
1982: Loan Scheme Extended to Baptist College Students
In 1982, Hong Kong further expanded its student loan program to cover post-advanced level students at Hong Kong Baptist College.
1984: City Polytechnic Included in Student Loan Scheme
In 1984, students at the newly established City Polytechnic became eligible for student loans in Hong Kong.
1990: Student Financial Assistance Agency Established in Hong Kong
A dedicated government office, the Student Financial Assistance Agency, was set up in Hong Kong in 1990 to oversee and manage the student loan scheme.
1990: Early UK Student Loans
Between 1990 and 1998, during the introductory phase of the UK's student loan system, loans were not collected through the tax system.
1998: Early UK Student Loans
Between 1990 and 1998, during the introductory phase of the UK's student loan system, loans were not collected through the tax system. The responsibility for proving income fell below a threshold for deferment rested with the borrower.
1998: UK Student Loan Repayment System
Starting in 1998, the UK began collecting student loan repayments through the tax system, based on the borrower's income.
2002: Decline in Public Spending on Education
Between 2002 and 2012, public spending on education decreased by 30%, while enrollment at public colleges and universities increased by 34%.
2005: Bankruptcy Reform Impacts Student Loan Debt
Starting in 2005, bankruptcy reform made it more difficult for individuals to discharge private student loan debt through bankruptcy. This change placed greater responsibility on debtors to manage their student loan debt, potentially discouraging bankruptcy filings as a means of addressing overwhelming debt.
2005: Bankruptcy Reform and Student Loans
Following the 2005 bankruptcy reform, even private student loans became non-dischargeable, creating a virtually risk-free investment for lenders, with average returns of 7 percent annually.
2005: Changes to Bankruptcy Laws and Private Student Loans
In 2005, bankruptcy laws were changed to include private student loans, making them non-dischargeable except under "undue hardship". Supporters argued this would lower interest rates, while critics believed it would increase lender profits.
2007: Investigation into Student Loan Lending Practices
In 2007, New York Attorney General Andrew Cuomo launched an investigation into the relationship between universities and student lenders. The investigation focused on alleged "kickbacks" to university financial aid staff for steering students towards specific lenders, often resulting in higher interest rates for borrowers.
2007: False Claims Lawsuit Against Student Lenders
In 2007, a former Department of Education researcher filed a lawsuit against major student loan lenders like Sallie Mae and Nelnet. The lawsuit alleged that these lenders defrauded the government and taxpayers by overcharging.
2007: Decline in Median Family Income
Median family income experienced a steady decline from 2007 to 2012, increasing the difficulty for students to repay tuition.
May 2009: Korea Student Aid Foundation (KOSAF) Established
In May 2009, South Korea established the Korea Student Aid Foundation (KOSAF) to manage student loans, aiming to prevent students from quitting studies due to financial constraints.
2009: Projected Education Loan Growth
In 2009, the education loan market was projected to grow at a rate of 32.3 percent in 2009-10.
August 2010: Nelnet Settles False Claims Lawsuit
In August 2010, Nelnet settled the 2007 lawsuit brought against it and other lenders and paid $55 million.
2010: Federal Student Loan Program Profitability
In 2010, the federal student loan program generated a multibillion-dollar profit for the government, particularly from loans to graduate and professional students due to high interest rates and low default rates.
2010: Projected Education Loan Growth
The education loan market was expected to see a growth rate of 39.8 percent in both 2010-11 and 2011-12.
2010: Elimination of Guaranteed Student Loan Program
In 2010, the US government eliminated the guaranteed student loan program, which involved private lenders but was guaranteed by the government. This was due to the perception that the guarantees benefited lenders more than students.
2011: UK Student Loan Repayment Threshold
For the 2011/2012 tax year, no repayments were required if the borrower's income was below £15,000, although interest continued to accrue.
2011: Projected Education Loan Growth
The education loan market was expected to see a growth rate of 39.8 percent in both 2010-11 and 2011-12.
2012: Decline in Public Spending on Education
Between 2002 and 2012, public spending on education decreased by 30%, while enrollment at public colleges and universities increased by 34%. During the same period, median family income saw a steady decline, making it harder for students to repay tuition.
2012: Projected Education Loan Growth
Between 2012 and 2015, the education loan market was projected to grow at a rate of 44.8 percent.
2012: UK Student Loan Repayment Thresholds
For the 2011/2012 tax year, the repayment threshold was set at £15,000. In 2012/2013, this threshold was raised to £21,000.
2013: Sale of Early UK Student Loans
In 2013, the Department for Business, Innovation and Skills sold a portfolio of student loans from the 1990s. Erudio, backed by CarVal and Arrow Global, purchased the portfolio and managed the accounts.
2013: Economists Assess Potential Student Loan Crisis
In 2013, economists analyzed the potential for a crisis due to rising student loan debt, which reached an estimated $1 trillion and affected two-thirds of college graduates. While acknowledging the high debt level, most experts did not believe a "student loan bubble" was imminent.
2013: UK Student Loan Repayment Threshold
For the 2012/2013 tax year, the repayment threshold for student loans was set at £21,000.
2014: Projected Education Loan Growth
Between 2012 and 2015, the education loan market was projected to grow at a rate of 44.8 percent.
August 2015: Vidya Lakshmi Portal Launch
On August 2015, the Indian government launched Vidya Lakshmi, a portal for students seeking educational loans. Several banks integrated their systems with the portal.
2019: Federal Pell Grant and Tuition Costs
For the 2019-2020 academic year, the maximum Federal Pell Grant was $6,195, while the average tuition for a four-year in-state public university was $26,590, leading many students to rely on loans.
August 15, 2020: Vidya Lakshmi Portal Updates
As of August 15, 2020, 37 banks were registered on the Vidya Lakshmi Portal, offering 137 loan schemes.
2020: Student Loan Debt Reaches $1.6 Trillion
By 2020, total student loan debt in the US reached $1.6 trillion.
2020: Joe Biden Campaigns on Student Loan Forgiveness
During his 2020 presidential campaign, Joe Biden pledged to implement student loan forgiveness. Public opinion polls indicated broad support for forgiving $10,000 in student loan debt for individuals earning less than $150,000 per year.
January 2025: UK Student Loan Cancellation
Starting in January 2025, UK student loan borrowers on repayment plan five will have their loans canceled after 40 years.