College in Sweden is free. So why do students have so much debt?

The high price of college has been blamed for rising student debt rates, and rightfully so. But it turns out, even making college free doesn’t necessarily eliminate student debt.

In Sweden, all colleges and universities offer free tuition for students. But, according to a report by Quartz, students there still graduate with a lot of debt. The average student debt at the beginning of 2013 was roughly 124,000 Swedish krona ($19,000). This is significantly higher than average debt in other European countries, where many students also attend college for free or low cost.

Despite college tuition being free in Sweden, average student debt isn’t significantly lower than in the U.S.

Sweden vs. the U.S.

Of course, the average U.S. student carries about 30% more in debt, at $24,800. But new Swedish graduates have the highest debt-to-income ratios of any group of students in the developed world, at about 80%. In the U.S., the average is closer to 60%. Why is this the case?

According to the story, it’s because young people are expected to pay for things themselves instead of relying on their parents to contribute or take out loans. Unlike in the U.S., parent income is not taken into account when applying for college or financial aid. Rather, it’s based on the individual student’s income.

Higher debt, easier repayment?

But what’s really noteworthy is that even though Swedish students graduate with relatively high levels of debt, they only have to put about 3.8% of their average monthly income toward the loans, according to one study. To contrast, depending on a student’s level of debt and monthly income here in the U.S., most students end up putting at least 15% of their income toward their monthly payments on the standard repayment plan.

The U.S. & Sweden: A tale of two student loan debt systems.

So why is debt easier for students in Sweden to manage? For one thing, the interest rates on student loans are much lower. They’re set by the government and maintained through subsidies. And the standard length of repayment is longer that in the U.S.: 25 years or until the student turns 60.

The Swedish system of student debt contrasts starkly with the U.S. system of high-interest rates, standard 10 year repayment plans, and the inability to discharge loans in bankruptcy. In Sweden, students are able to live their lives as viable adults separate from their parents, whereas the American system forces students to live with their parents longer and put off “adult” purchases like cars and homes. This negatively affects the economy and makes it more difficult for borrowers to get out of debt.

What it means for U.S. student loan borrowers

What’s the main takeaway from all this? Total student debt is not the issue–most people realize higher education is an investment, and it may be necessary to take out loans to cover expenses while you’re in school. What really matters is how the debt affects your life once you leave college.

Attempting to pay off high-interest student loans on the standard repayment plan while earning a meager salary and covering other essential expenses like rent, food, and car payments would cause anyone significant stress. For many borrowers, it’s nearly impossible. That’s why student loan reform in the U.S. is necessary. Since there are few options available for loan forgiveness, we have to find a way to make paying off debt manageable for borrowers.

Lowering interest rates on federal student loans–and keeping them low–is one way to do that. Another way is to expand repayment options and encourage borrowers to seek these out before going into default. As government officials offer proposals on how to fix the country’s student debt crisis, our nation could benefit from looking globally for a viable long-term solution.