|This centre is a member of The LSE Research Laboratory [RLAB]: CASE | CEE | CEP | SERC | STICERD||Cookies?|
Paper No' CASE/124: | Full paper
Save Reference as: BibTeX File | EndNote Import File
Keywords: Higher Education Finance; income-contingent loans, risk pooling and risk shifting
JEL Classification: I28; H520
Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: CASE Papers
Share this page: Google Bookmarks | Facebook | Twitter
Abstract:The arguments for refinancing the European Union’s (EU) higher education via higher tuition fees largely rest on preserving the profitability of the educational investment and offering deferred and income-contingent payments. Using income survey datasets on Belgium, Germany and the United Kingdom (UK) we first estimate how graduates’ private return on educational investment is likely to be affected by higher private contributions. We then evaluate the effect of income-contingent and deferred payment mechanisms on lifetime net income and its capacity to account for graduates’ ability to pay, considering numerous ways of financing the cost of introducing income-contingency. Our analysis reveals that increasing individuals’ contributions to higher education costs, through income-contingent and deferred instruments, does not significantly affect the private rate of return of heterogeneous graduates, allows for payments to be indexed to ability to pay, and can be implemented in ways that minimize the risk of adverse selection. These findings prove robust to significant variations between countries’ unharmonised higher education institutional structures.
Copyright © RLAB & LSE 2003 - 2014 | LSE, Houghton Street, London WC2A 2AE | Contact: RLAB | Site updated 24 October 2014