Repayment burdens of mortgage-style student loans in China and steps toward income-contingent loans

Yu Cai, Bruce Chapman, Qing Wang*

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    12 Citations (Scopus)

    Abstract

    Currently China is experiencing unprecedented growth in higher education enrolments, with this trend set to continue. Whether higher education financing policy is able to facilitate this expansion is a critical issue for both education outcomes and economic growth. Using cross-sectional earnings data from the Chinese Household Income Project we find that a significant proportion of low-income graduates have a high likelihood of experiencing financial difficulties with current loan arrangements, implying high levels of financial hardship, a reliance on family members to meet repayments in order to avoid difficulties, and for some, default. In contrast we show that a properly designed income-contingent loan scheme has the potential to significantly mitigate, even eliminate, these concerns without attendant high budgetary costs. Our findings have important policy implications for Chinese higher education financing.

    Original languageEnglish
    Pages (from-to)95-108
    Number of pages14
    JournalEconomics of Education Review
    Volume71
    DOIs
    Publication statusPublished - Aug 2019

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