While student loans are cheaper (and hence more commonly used) than grants, they still cost money, both in terms of interest subsidies and in terms of loan losses through loan defaults.  As a result, nowhere are they unlimited in scope.  Every government finds ways to ration loans.  Today, I thought I’d go through some of the ways governments do that and – in passing – help everyone understand in what ways North American loan systems are generous in comparison with those elsewhere.

So, the first and most obvious way loans get limited are by institution and program type.  In some countries, students at private institutions are ineligible for publicly financed loans or (as in Chile) only have access to a separate and less generous student loan program.  In the UK, loans for domestic students to attend master’s programs were only introduced in 2016 despite tuition fees having been introduced 20 years earlier.   Canada’s system covers a wider swath of programs than others: as of 2015, we have a special loan system to cover living expenses for apprentices, and Quebec is one of only two jurisdictions (Norway is the other), which offer loans to cover not only higher education but certain types of upper secondary school as well. 

Another way most countries ration loans is by restricting it to full-time studies.  This is effectively an automatic restriction in countries where part-time studies are rare to non-existent (as it is for the most part is outside of Anglophone countries).  But Australia and the UK do not allow part-time students loans (a reader has correctly pointed out that I am out to lunch here: the UK did recently begin offering loans to part-time students and Australia has always done so, at least for tuition. My bad.) and here in Canada we only allow part-time students (those taking less than 60 percent of a full course load) access to a separate and generally much less generous program.  The Americans probably have the world’s most generous system as far as part-time students go.

Age is also sometimes used to limit loan access.   In some countries—notably Germany—aid is restricted to those who are below a certain age when they start their program. For example, German undergraduates must be under thirty years of age to qualify; for postgraduate students, age is restricted to individuals under thirty-five years.

Academic merit is another way that aid gets rationed.  Most countries (including Canada) have what are called “Satisfactory Progress” rules, which prevent students who are continually failing courses from repeatedly accessing loans in the first place.  For example, in Sweden, where college is free but living expenses are high, students must pass 75 percent of their courses each year to continue receiving aid.  In Italy, access to all loans comes with a merit-criteria; the same is also true of PROUNI grants in Brazil and has recently been proposed for student loans in the UK. Japan has two types of “scholarship loans”—one with interest and one without and the latter is restricted to students who meet a merit test (although since the country is currently experiencing negative interest rates this doesn’t matter much).

As you can see, on most of these measures, Canada comes out looking reasonably generous.  However, there is one way Canada restricts loans in a way which is quite unique; namely, it requires older students (those over the age of 22) to pass a credit check if they are applying for a student loan for the first time.  It’s a reasonably easy check: one only gets screened out if they have had three credit events lasting over three months on debts of $1,000 or more, or if the student has recently had a bankruptcy or foreclosure.  Very few people run afoul of this rule, but it is notable because everywhere else in the world, the entire point of a public loans is to not take individual credit into account (note: this is not a policy anyone would put in place today, but the mid-90s were a different and much harder time, economically).

And remember – all of this rationing occurs before we get to the question of how much money to lend to students, which is a topic I’ll come back to next week.  In the meantime, have a great weekend.