The new student loan system in Chile’s higher education

Abstract

Chile’s higher education system stands out as being one of the most privatized and open to the market in the world. Recently, the Chilean Congress passed Law # 20.027 of 2005, which provides the legal framework for the creation of a student loan system guaranteed both by the State and by higher education institutions (HEIs), financed by the private capital market through the securitization of the loans. The system operated for the first time in 2006, where approximately 21,000 students were able to access financing of their higher education for the remainder of their careers. It is expected that as the system matures, more and better information will be available, which will benefit the students and the HEIs; and it is highly likely that the current number of financed students could grow significantly in the next few years. The purpose of this article is to describe the outstanding characteristics of this system, explain its conceptual basis and analyze the public policy choices available in its design.