Students can also take out cost-of-living, or maintenance, loans, which are repaid in the same way. The top amount they can borrow, if they're living in London and away from home, is $11,431 a year. Maintenance loans are, however, means-tested. If their household income is more than $83,784, the amount students can borrow is reduced, depending on how much more their parents earn.
Interest rates on student loans are equal to the rate of inflation. However, another LSE economist, Nicholas Barr, argues that's too low.
There are some signs that the United States could be moving toward this model. This summer, the Department of Education enacted an income-based repayment program for student loan debtors. Those who use the program can cut their federal loan debts to less than 15 percent of their income. The federal government also has enacted a loan forgiveness program for those who pursue public-service careers. They can have their federal loan debt wiped clear after 120 payments (or 10 years).
For many students, these programs should offer welcome relief. But there still is some ground to cover before the American student loan program matches its British peer. Barr says that an income-contingent repayment plan in the States should charge the same rate it costs the government to borrow the money. A real interest rate that's essentially zero, Barr says, puts too much fiscal pressure on government finances, resulting in student loans that are typically too small—which reduces access to higher education because many disadvantaged students need larger sums to truly cover expenses. Bigger loans with slightly steeper interest rates won't punish poorer students, Barr says, because they're protected by the income-contingent payback scheme and, in the United Kingdom, a 25-year forgiveness limit. The American income-based program offers some interest rate benefits once payments begin but still charges an interest rate (this year, it's 7.1 percent).
Taking a break. OK, once students know which college they're attending and how they'll pay for it, what's next? How about a year off? The British are the world leaders in taking so-called gap-year breaks. Around 230,000 British 18-year-olds take one each year. Tom Griffiths, founder of Gapyear.com, reckons that around 15 percent of college-bound students defer their studies for a year to . . . well, to do what? Some work to shore up their finances. Some head overseas as volunteers for various charities. Others "road test" potential careers by getting a "gofer" job in their industry of choice. "But the vast majority just backpack around the world," Griffiths says.
Many also mix and match their options. Tom Hart, for example, spent the first seven months of his gap year working in a pub to earn money for a three-month trip to Southeast Asia. He and best friend Theo Ford then tramped through Vietnam, Cambodia, Laos, and Thailand. Hart's home now, back at the pub, working to earn extra money for spending once he's at college.
To many American parents, the notion of a gap year might seem like 12 months wasted, goofing off. But many educators claim that students who take a gap year often excel in college. "They do a lot of growing up in that year, and they have a greater sense of what they want to do when they get here," says Angela Milln, director of student recruitment at Bristol. And, adds Cambridge's Beard, "some gap years can actively reinforce a candidate's application." For instance, time spent doing volunteer work overseas could bolster the chances of a student's studying geography or anthropology.
Gap years are gaining traction in the United States. American users on Gapyear.com have grown from less than a percent to 10 percent. Princeton University this fall launches its own "bridge year" program: Twenty incoming freshmen will spend a year doing social-service work in a developing country before taking any classes. Harvard College has for 30 years now recommended that incoming students take a gap year before commencing studies, and every year about 50 to 70 freshmen heed that advice.
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