Chapman, Bruce; Dearden, Lorraine; Doan, Dung; (2022) How should governments finance student loans? Lessons from around the world 1. In: Mendolia, Silvia and O'Brien, Martin and Paloyo, Alfredo and Yerokhin, Oleg, (eds.) Critical Perspectives on Economics of Education. (pp. 21-42). Routledge: London, UK.

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Abstract

Two issues with respect to higher education financing on which economists are in broad agreement are that a tuition charge is justified on the grounds of equity and that government intervention is necessary for the provision of student loans. This chapter explores in detail two types of loans, those collected on the basis of time (time-based repayment loans, TBRL) and those in which repayment depends on income (income-contingent loans, ICL). Internationally, while TBRL remain the most common form of loans, there has been a quiet trend over the last 30 years towards the adoption of ICL. It is expected that the number of countries with ICL will increase significantly in the next few years. The chapter explains the important differences between the two types of loans and compares the experiences of around a dozen different national higher education loan systems. We also provide an overarching survey of the empirical literature and highlight key areas in need of further research. Most originally, we examine the implications of student loan systems in the context of the major disruption to labour markets that have accompanied COVID-19.

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