Income contingent student loan design: Lessons from around the world

Jack Britton; Laura van der Erve; Tim Higgins

doi:10.1016/j.econedurev.2018.06.001

Income contingent student loan design: Lessons from around the world

Jack Britton^*, Laura van der Erve, Tim Higgins

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

26 Citations (Scopus)

Abstract

The use of income contingent loans (ICLs) for Higher Education (HE) students is becoming increasingly prevalent around the world. Using a model of simulated lifetime earnings for graduates, in this paper we show that the impact of the design of ICLs on the magnitude and distribution of government subsidies is highly dependent on the institutional setting. In particular, the average debt level as a share of average earnings is a key determinant of the impact of various policy parameters. The variance of earnings within the graduate population is also shown to be a determinant of ICL taxpayer costs. This paper is the first comparative exercise of impact of the design of ICLs in different settings, and the findings are highly relevant to countries looking to implement or reform their student loan systems.

Original language	English
Pages (from-to)	65-82
Number of pages	18
Journal	Economics of Education Review
Volume	71
DOIs	https://doi.org/10.1016/j.econedurev.2018.06.001
Publication status	Published - Aug 2019

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10.1016/j.econedurev.2018.06.001

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title = "Income contingent student loan design: Lessons from around the world",

abstract = "The use of income contingent loans (ICLs) for Higher Education (HE) students is becoming increasingly prevalent around the world. Using a model of simulated lifetime earnings for graduates, in this paper we show that the impact of the design of ICLs on the magnitude and distribution of government subsidies is highly dependent on the institutional setting. In particular, the average debt level as a share of average earnings is a key determinant of the impact of various policy parameters. The variance of earnings within the graduate population is also shown to be a determinant of ICL taxpayer costs. This paper is the first comparative exercise of impact of the design of ICLs in different settings, and the findings are highly relevant to countries looking to implement or reform their student loan systems.",

keywords = "Educational finance, Higher education funding, Income contingent loans, Tuition fees",

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AB - The use of income contingent loans (ICLs) for Higher Education (HE) students is becoming increasingly prevalent around the world. Using a model of simulated lifetime earnings for graduates, in this paper we show that the impact of the design of ICLs on the magnitude and distribution of government subsidies is highly dependent on the institutional setting. In particular, the average debt level as a share of average earnings is a key determinant of the impact of various policy parameters. The variance of earnings within the graduate population is also shown to be a determinant of ICL taxpayer costs. This paper is the first comparative exercise of impact of the design of ICLs in different settings, and the findings are highly relevant to countries looking to implement or reform their student loan systems.

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JO - Economics of Education Review

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Income contingent student loan design: Lessons from around the world

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