Income Contingent Loans Research Articles

Higher education and public good in England

AbstractIn the Anglophone jurisdictions, higher education policy is over-determined by economic policy and subjected to neoliberal regulation based on quasi-market competition between corporatised institutions, regulated by performative comparisons, tuition fees, and outputs imagined as commodities. England installed marketisation in successive policy changes between the Thatcher government’s introduction of commercial fees for international students in 1979 and the full-fee market for domestic students, supported by subsidised income-contingent loans, in 2012. Policy commitment to public good outcomes (the collective and non-pecuniary individual benefits of higher education) was largely emptied out, leaving only attenuated proxies such as widening participation and research impact. Responsibility for public good outcomes was transferred from government to institutions. Following a discussion of Anglophone concepts of ‘public’ and an overview of key policy reports from 1963–2019, the paper reports on qualitative research into approaches to higher education and public good in England. There were 24 semi-structured interviews, with middle and senior manager-leaders in two universities and policy professionals. Nearly all advocated a broad public good role, in contrast to policy in England, and provided examples of public outcomes in higher education. However, these concepts lacked clarity, while at the same time the shaping effects of the market were sharply understood.

Educating for a Just Transition, or the Poverty of Human Capital Theory

The focus of this article is on the contemporary re-application of human capital theory to higher education, looking specifically at the English system. The introduction of ‘income contingent loans’, a neoliberal invention enabled by modern big data finance systems, allows the state to calculate the financial value of specific degrees at particular universities. This financialisation not only shapes students into ‘entrepreneurs of the self’ but also disciplines universities into advancing the marketisation of higher education. However, a critical examination of human capital theory reveals contradictions between its ideological underpinnings and the reality of graduates’ experiences, with the application of human capital theory in practice leading to an oversupply of graduates in the job market. This situation, exacerbated by the 2007‐2008 global financial crisis, has resulted in a generation facing overqualification and underemployment, contributing to a generational crisis. However, this deepening contradiction between ideology and reality, combined with heightened awareness of global crises like climate change among young people, creates an opportunity for counter-hegemonic struggle. By addressing environmental challenges through a ‘net zero’ strategy actually worth its name, the UK government would create millions of green jobs, many requiring university education. This, then, presents the educational left with a strategic opportunity to advocate for the future of both the planet and higher education, highlighting the interconnectedness of environmental and educational concerns.

Comparative Analysis of Higher Education Financing Policies Used by OECD Member Countries and Financing Policy Proposal for Türkiye

The Turkish higher education system has developed remarkably in parallel with the developments and changes in the world today. With the ease of access to higher education for students and the increase in the number of students, higher education costs are increasing. This situation puts the higher education system under financial pressure in countries that provide higher education financing from public sources. In this study, higher education financing methods used worldwide are compared and the most appropriate financing method for Türkiye is discussed. For this purpose, the Entropy method was used in weighting the criteria determined for the evaluation of financing policies, and the performance analysis of the alternatives was carried out with the TOPSIS method, which is one of the multi-criteria decision-making methods. Alternative decision options for financing higher education are based on "No Fee", "Pre-charging" and "Income-Contingent Loan-ICL" methods and the main criteria are enrollment, education expenditures and labor force. In this context, sub-criteria were created and the financing methods used by OECD countries were analyzed. Within the scope of the study, it has been determined that the financing methods used by Norway, the Netherlands and the United Kingdom in higher education systems are in the top three. In this context, it has been determined that the "Income-Contingent Loan" method used by the first and third ranked countries is the most preferred method in terms of performance.

Equity and Sustainability in Higher Education Financial Aid: Income Contingent Loans in Colombia

Equity and Sustainability in Higher Education Financial Aid: Income Contingent Loans in Colombia

Optimal Tax Theory for Investment in Human Capital and the Role of Family

Purpose: Parents spend more than half of all education expenditures on children’s education, thus the role of the family cannot be omitted in determining the optimal educational policy. The main aim of the article is to present economic literature on optimal taxation with human capital, focusing on studies concerning the impact of the family (parents) on the investment in children’s human capital. Design/Methodology/Approach: Insights from two workhorses are reviewed: the RAMSEY approach and the MIRRLEES approach. The literature in the field considers two instruments: Income-Contingent Loans (ICL) and Education Subsidies (ES). Results from theoretical and simulation studies are summarized. Findings: Income-contingent repayment loans can improve welfare, whereas the effects of education subsidies may be positive only under some assumptions. Research limitations/Implications: The MIRRLEES approach is a relatively new strand of literature and due to numerically complexity all researches analyze only partial-equilibrium models with simple set-up (without altruistic families/ fertility decisions/ pension systems). Originality/value: The article provides guidance for policymaker and decision-makers regarding optimal higher education systems and financial support systems for students.

Against the pedagogy of debt in South African higher education

On the back of decades of austerity, marketisation, credentialization and related neoliberal conceptions of education and society, a student debt crisis has emerged in higher education (HE). Despite the well-documented history of government-guaranteed income contingent loans (ICLs) indenturing students and their present and future families, such loans continue to be canvassed by policymakers and interest groups as an ideal ladder of educational opportunity, particularly for students from traditionally excluded communities. In this paper, the author brings together insights from Jeffrey Williams’ Pedagogy of Debt, Carter G Woodson’s Miseducation, Ha-Joon Chang’s idea of Bad Samaritans, and Kwame Nkrumah’s theory of Sham Independence as conceptual building blocks to reinforce the wall of resistance against the orthodoxy of debt as a paradigm for HE funding in South Africa. To add to the student debt abolition movements and the voices calling for freeing public HE, this paper critically reviews the recommendations of South Africa’s 2017 Fees Commission Report. This is done to offer an analysis that makes explicit the likely impact of the proposed student loan policy on South Africa. As we imagine transitioning towards the new African University, this paper makes a case for freeing public HE for all, on the basis of mutual aid, transitional and reparative justice.

The Debt Trap, by JoshMitchell (Simon & Schuster, New York, NY, 2021), 272 pages*

Economic RecordEarly View Review The Debt Trap, by Josh Mitchell (Simon & Schuster, New York, NY, 2021), 272 pages * Bruce Chapman, Corresponding Author Bruce Chapman [email protected] College of Business and Economics, Australian National UniversitySearch for more papers by this author Bruce Chapman, Corresponding Author Bruce Chapman [email protected] College of Business and Economics, Australian National UniversitySearch for more papers by this author First published: 29 May 2023 https://doi.org/10.1111/1475-4932.12738 With thanks to Robert Shireman. The author alone is responsible for errors and omissions. Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL References Barr, N., Dearden, L. and Dynarski, S. (2019), ‘The US College Loans System: Reform Lessons from Australia and England’, Economics of Education Review, 71, 32– 49. Chapman, B. (2018), ‘Book Review of the Student Loans Mess (by Joel Best and Eric Best)’, Economic Record, 94, 204– 6. Chapman, B. and Doan, D. (2019), ‘Introduction to the Special Issue: Higher Education Financing: Student Loans’, Economics of Education Review, 71, 1– 7. Shireman, R. (2017), ‘Learn Now, Pay Later: A History of Income-Contingent Student Loans in the United States’, Annals of the American Academy of Political and Social Sciences, 671, 184– 201. Stiglitz, J.E. (2014), ‘ Remarks on Income Contingent Loans: How Effective Can they be at Mitigating Risk?’ in B. Chapman, T. Higgins and J.E. Stiglitz (eds), Income Contingent Loans: Theory, Practice and Prospects, IEA Conference Volume No. 153, Barcelona, Spain. New York, NY: Palgrave Macmillan; 31– 8. Early ViewOnline Version of Record before inclusion in an issue ReferencesRelatedInformation

College education and income contingent loans in equilibrium

In 2009 the US government introduced a major income-contingent loans (ICLs) program for financing higher education. We investigate its welfare implications in the presence of income shocks, and endogenous dropout risk and college enrollment. While ICLs provide valuable income insurance and thereby increase college enrollment by risk averse agents, they may also lead to adverse selection of individuals with lower ability and generate a moral hazard cost of lowering educational effort and labor hours. We evaluate this insurance-incentives trade-off in a calibrated heterogeneous agent model. We show that ICLs increase welfare and that the social costs of adverse selection and moral hazard are mild.

Income-contingent loans in higher education financing

Income-contingent loans in higher education financing

Postgraduate Income Contingent Loan Scheme : A Comparative Study of the United States, the United Kingdom and Australia

[연구목적] 이 연구는 미국, 영국, 호주의 대학원생 소득연계 학자금 대출 제도를 분석하여 우리나라 대학원생 취업 후 상환 학자금 대출 제도 도입에 필요한 시사점을 모색하는데 목적이 있다. [연구방법] 이를 위해 각 국가의 학자금 대출 관련 웹사이트에 탑재된 내용 및 안내책자 등을 분석하였고, 관련 연구보고서, 학술논문, 법령자료 등 각종 문헌자료를 참고하였다. 또한 선행연구 분석을 통해 소득연계 학자금 대출 제도의 도입 및 운영상의 쟁점으로 법적 근거, 관리 기관, 대출 유형, 지원 기준, 상환 방식을 선정하였으며, 이를 분석 준거로 활용하였다. [연구결과] 주요 연구결과는 다음과 같다. 첫째, 미국, 영국, 호주는 모두 법적 근거에 기반하여 대학원생 소득연계 학자금 대출 제도를 운영하고 있다. 둘째, 미국과 영국은 학자금 대출과 상환을 담당하는 기관이 존재하지만 호주는 교육부, 대학, 국세청이 지원 및 상환업무를 분담한다. 셋째, 지원기준 중 소득기준은 모든 국가에서 적용하지 않으며, 성적기준은 호주에서만, 연령기준은 영국에서만 적용하는 것으로 나타났다. 넷째, 미국과 영국은 대출 프로그램별 대출한도가 정해져 있는 반면, 호주는 통합 HELP로 대출한도가 통합, 관리된다. 다섯째, 미국과 영국은 이자율을 적용하는 반면, 호주는 이자율을 적용하지 않는 것으로 나타났다. 여섯째, 미국, 영국, 호주는 모두 상환기준소득을 설정하고 있다. 일곱째, 미국과 영국은 소득에 관계없이 동일한 상환율을 적용하는 반면, 호주는 소득에 따라 상환율을 차등 적용하는 것으로 나타났다. 여덟째, 미국과 영국은 상환소요기간에 대한 기준이 있으나 호주는 상환소요기간에 대한 기준이 없는 것으로 나타났다. [결론] 분석결과를 바탕으로 우리나라 대학원생 취업 후 상환 학자금 대출 제도의 도입 및 설계 방향에 대한 시사점을 도출하였다.[Purpose] The purposes of this study are to analyze the postgraduate income contingent loan scheme in the United States, the United Kingdom and Australia, and to draw implications for the introduction of the scheme in Korea. [Methods] To achieve the purposes of this study, the contents and brochures on each country’s student loan websites were examined, and various literature materials such as research reports, articles, legal materials were used. Drawing on prior literature, issues such as a legal basis, management institutions, loan program, eligibility criteria, and repayment criteria were selected as basis of analysis in the introduction and operation of the postgraduate income contingent loan scheme. [Results] The major findings are as follows. First, all countries operate postgraduate income contingent loan scheme based on the legal basis. Second, the United States and the United Kingdom have institutions for student loan scheme, but in Australia the work of student loan shares with the Department of Education, Skills and Employment, universities, and Australian Taxation Office. Third, all countries do not apply income criteria; grade restriction is only applied in Australia, and age restriction is only applied in the United Kingdom. Fourth, while the loan limit in the United States and the United Kingdom is calculated by each loan program, Australia counts all loans debts as a Combined HELP loan limit. Fifth, the United States and the United Kingdom apply interest rates, while Australia does not. Sixth, all countries set repayment threshold. Seventh, the United States and the United Kingdom apply the same repayment rate regardless of income, while Australia applies different repayment rates depending on income status. Eighth, the United States and the United Kingdom provide repayment periods, whereas Australia has not. [Conclusion] Based on the findings, we suggest implications for the introduction and design of the postgraduate income contingent loan scheme in Korea.

Generating Stable University Funding Mechanisms: Income Contingent Loan Structure Choice within the Irish Education System

Generating Stable University Funding Mechanisms: Income Contingent Loan Structure Choice within the Irish Education System

Tuition fees, entrance examinations and misconceptions about equity in higher music education

The increasing participation rate in higher education has raised its own issues, such as how to fund the growth while retaining the quality of education. In Finland, it has been argued that the tuition-free higher education policy increases equality. On the other hand, in the United Kingdom, establishing a system of tuition fees supported by an income-contingent loan system for students has also been argued to increase equality. In Australia, students also face high tuition fees for higher education, as well as a support system focused on domestic students. In addition to tuition fees, entrance examinations also play a crucial part in higher education systems. In order to examine inequalities in higher education from the students’ point of view, tuition fees are scrutinised in connection with equality, and entrance examinations in relation to cultural reproduction. Comparing examples of higher music education institutions in Finland, the United Kingdom, and Australia shows that there are large differences between the tuition fees charged for domestic and international students, as well as between countries. Entrance examinations in higher music education are similar in these countries, but may include inequalities based on long traditions in the field of music, especially in classical music. By revealing misconceptions about equity in higher education, it is possible to have a critical debate about the role of tuition fee systems as they are connected with the economics of higher education, and about entrance examinations as reproducing social class inequalities. This discussion may contribute to the redefinition and reformation of more equitable and just education systems, and promote equality in general in society.

Understanding recent HECS–HELP price misunderstandings

AbstractIn October 2020, the Australian Parliament legislated what appear to be significant changes in HECS–HELP prices, the tuition charges levied on domestic undergraduate students. Through this policy change, the Government aims to influence student choices in order to help deliver the skill changes presumed to be required for the economy's post‐COVID make‐up. This paper examines, in conceptual and empirical terms, a key aspect of the motivation for the reform, the true meaning of prices in the HECS–HELP world of an income‐contingent loan (ICL). We explain the conceptual basis of ICL charges and, with 2016 Census data, illustrate the meaning of the price changes between disciplines, by gender, and for a suite of expected future graduate lifetime income distributions. Our analysis points strongly to the conclusion that the true price changes are far less than they appear to be, highlighting the potential of there being quite muted consequences for student discipline choices.

Australian Government failure and the VET FEE-HELP loan programme

PurposeIn an effort to boost participation in vocational education and training (VET), in 2009, the Australian Government launched its VET FEE-HELP income-contingent loan programme for VET students. The programme was terminated in 2016 following numerous failed attempts to arrest its escalating costs and improve its performance. In an effort to shed light on the failure of the VET FEE-HELP programme, in this paper, the authors offer estimates of the aggregate costs involved and the quantum of graduates.Design/methodology/approachIn this paper, the authors examined the VET FEE-HELP programme through the analytical lens offered by Marsh and McConnell’s (2010) framework, which offered a broad, “big-picture” view covering three dimensions of policy success or failure.FindingsBy identifying the causes of the failure, the authors concluded that the features of the scheme designed to improve accessibility of VET also allowed for exploitative behaviour on the part of VET providers, causing deterioration in training quality and leading to a substantial amount of wasteful public expenditure.Originality/valueThe authors seek to illuminate the demise of the hitherto neglected programme to contribute towards the literature on Australian Government failure.

Income-Contingent Loans as an Unemployment Benefit

Imperfections in risk and capital markets imply that individuals who lose jobs suffer from imperfect smoothing of consumption across states and times. Compared to the first best, there will be too little search. Optimal unemployment programs, which balance the marginal benefit of consumption smoothing vs. the marginal cost of the insurance externality, increase welfare and may even increase GDP. Our analytical results suggest that welfare is higher if the unemployment benefits program includes income-contingent unemployment loans (ICL), where the amount repaid depends on the individual’s future income. Such loans can be financed by a risk premium imposed on the unemployed who avail themselves of the loans, and partially substitute for unemployment insurance (UI) benefits. Optimal unemployment benefits programs (UB) with ICL do a better job of smoothing consumption across states and time, and in particular total benefits when unemployed increase. We analyze how changes in key parameters, such as the degree of risk aversion and the nature of post-employment work, affect the design of the optimal UB program and the magnitude of the incremental benefits from including income-contingent loans. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

COVID-19, markets and the crisis of the higher education regulatory state: the case of Australia

ABSTRACT This article explores the impact of COVID-19 on the Australian higher education system. It analyses how the contradictions of Australian higher education, driven by expanding participation in the higher education system within the context of contained public funding, have been politically managed through regulatory regimes that link the public university with the neoliberal capitalist economy. Such modes of state intervention have been dependent on financialized instruments such as income contingent loans, the education–migration nexus, and precarious work. These regulatory instruments, embedded within a project of market citizenship, have both managed and expanded the marketization of higher education while also expanding participation. It is this regulatory model of market citizenship that is now facing a crisis of crisis management.

Comparing and learning from English and American higher education access and completion policies

ABSTRACT England and the United States provide a very interesting pairing as countries with many similarities, but also instructive dissimilarities, with respect to their policies for higher education access and success. We focus on five key policy strands: student information provision; outreach from higher education institutions; student financial aid; affirmative action or contextualisation in higher education admissions; and programmes to improve higher education retention and completion. At the end, we draw conclusions on what England and the US can learn from each other. The US would benefit from following England in using Access and Participation Plans to govern university outreach efforts, making more use of income-contingent loans, and expanding the range of information provided to prospective higher education students. Meanwhile, England would benefit from following the US in making greater use of grant aid to students, devoting more policy attention to educational decisions students are making in early secondary school, and expanding its use of contextualised admissions. While we focus on England and the US, we think that the policy recommendations we make carry wider applicability. Many other countries with somewhat similar educational structures, experiences, and challenges could learn useful lessons from the policy experiences of these two countries.

College Education and Income Contingent Loans in Equilibrium: Theory and Quantitative Evaluation

We investigate the welfare implications of income-contingent loans (ICLs) used for financing college education in presence of the dropout risk that depends on unobservable effort. Using a simple model, we show that the laissez-faire enrollment is inefficiently low due to missing insurance against dropping out. However, providing this insurance generates a moral hazard cost of lowering effort. We show that ICLs can implement the second best allocation. Then, we construct a heterogeneous agent OLG life-cycle model, calibrate it to the US and show that ICLs significantly increase welfare and that their non-linear structure is essential to delivering high welfare gains.

Income contingent university loans: Policy design and an application to Spain

SUMMARY In Europe, the need for additional funding coming from either budget cuts and/or increased costs due to increased competition in university quality has reopened the debate on the financing of university systems. An attractive alternative to the current general-tax-financed subsidies is Income Contingent Loans (ICL), a flexible scheme that puts more weight on private resources while enhancing progressivity. One challenge of the viability of ICL systems is the functioning of the labor market for university graduates. This paper offers a general analysis of the economics of ICL, followed by an application to Spain. We set up a loan laboratory in which we can explore the distributional effects of different loan systems to finance tertiary education at current costs as well as to increase university funding to improve its quality. We use simulated lifetime earnings of graduates matching the dynamics of employment and earnings in the Spanish administrative social security data to calculate the burden of introducing ICL for individuals at different points of the earnings distribution and for the government. We find that (1) our proposed structure is highly progressive under all specifications, with the top quarter of the distribution paying close to the full amount of the tuition and the bottom 10% paying almost no tuition and (2) the share of total university education subsidized by the government is between 16 and 56 percentage points less than under the current system.

Gender Issues in Income-Contingent Student Loans: Do Women Benefit?

Although tertiary study is strongly associated with positive wealth outcomes, for those on the margin student debt can be a deterrent, a source of financial stress, or an indicator of irresponsible bad financial behaviour. In Australia, recent debate regarding the income-contingent loan (ICL) student debt scheme has highlighted gender differences in the ability to repay the debt. Drawing on the Australian HILDA Survey data for 2002–14, this study examined the gender differences for student debt holders, pinpointing some of the gender differences in the student debt trajectory and transitions over the sample period. Findings do show that student debtors in general are slightly less satisfied with their financial situation than the general population and are more likely to be from a socio-economically advantaged background. Results indicate that women are not particularly disadvantaged under the ICL scheme regarding the issues examined.