Search Results

Student loans are the main method of direct government support for higher education students. Money is loaned to students at a subsidised rate to help towards their maintenance costs and to cover the cost of tuition fees. Currently more than £10 billion is loaned to students each year. This is expected to grow rapidly over the [next] few years and the Government expects the value of outstanding loans to reach over £100 billion (2014-15 prices) in 2018 and continue to increase in real terms to around £330 billion (2014-15 prices) by the middle of this century. Graduates repay these loans to the government after their earnings exceed the threshold level. These loans are therefore private contributions towards the costs of higher education. The student loans system aims to ensure that upfront costs do not deter potential students. Graduates repay student loans and they generally have above average incomes. In the past the loans system has been criticised on a number of different grounds including not covering living costs, excluding part-time students, being too expensive, targeting its interest rate subsidy at higher earning graduates and putting off those who are concerned about graduating with large debts. This note gives a background to student loans, statistics on their take-up, total value owed, repayment, public expenditure, arguments for reform and factors that affect take-up.

Summary from publisher's website. Show less

In 2010-11, the Canada Student Loans Program (CSLP) provided $2.2 billion in loans to approximately 425,000 full-time students in the 10 participating provinces and territories. On average, students completing their studies (whether they graduated from their program or not) in 2010-11 had accumulated $13,000 in CSLP loans from the federal government. Total debt levels for these students were several thousand dollars higher, since many students also borrow from provincial student loan programs, credit cards, and private lenders. This paper seeks to understand why some borrowers experience repayment difficulties.

Edited excerpts from publication. Show less

We propose a simple theoretical model which shows how the combined effect of wage uncertainty and risk aversion can modify the individual willingness to pay for a HE system financed by an [income contingent loan] ICL or a [mortgage loan] ML. We calibrate our model using real data from the 1970 British Cohort Survey together with the features of the English HE financing system. We allow for individual heterogeneity by considering different family backgrounds and occupations. We find that graduates from poor families, males and graduates working in the private sector are more willing to pay to switch to an ICL. Using the UK Labour Force Survey we evaluate the distributive effects of our model. We compute the repayment burdens and taxpayer subsidies for average, low and high earnings graduates. The results confirm the important insurance benefits of an ICL compared to a ML, with lower burdens and higher subsidies for poorer graduates.

Published abstract reprinted by permission of the copyright owner. Show less

Individual risk aversion and riskiness of investment in higher education (HE) are combined with two alternative loan-based financing systems, income contingent loans (ICL) and mortgage loans (ML), to investigate the effects on graduate lifetime expected utilities. We deal explicitly with the presence of hidden subsidies due to discounting, which is one of the main drawbacks of an ICL. The theoretical model has been calibrated using real data on graduate earnings and their volatility, together with the features of the English HE financing system, which has recently switched from a ML to an ICL system. Higher uncertainty in earnings in general makes an ICL the preferred system for risk averse individuals, while risk neutral individuals prefer mortgage loans.

Published abstract from LUMS website. Show less

The Thai higher education sector has expanded quickly during the past decade, making a transition from an elitist to a mass institution. A driving force behind the expansion was believed to be the Student Loan Fund (SLF), introduced in 1996. During the first 10 years of its operation, the SLF has lent to more than 2.6 million students, with the loan value totaling 5.7 billion dollars. However, there has been no systematic evaluation of the scheme. This paper provides a very first attempt to evaluate the SLF. We found that it had serious weaknesses in terms of loan screening; delay in loan disbursement and low collection rate. We also found that it failed to promote enrollment in higher education, except for students from poor households.

Published abstract reprinted from ‘Economics of education review’, copyright 2010, with permission from Elsevier. Show less

The degree to which students are able to make adequate repayments on their student loans and avoid default is of special concern for colleges. If too many former students go into default, the college will face sanctions by the federal government and lose eligibility to provide currently enrolled students federal financial aid, such as the Pell grant. To avoid these sanctions, some colleges have chosen not to participate in federal loan programs by excluding loans from students' financial aid packages. In this article, [the author] investigates the student-level impacts associated with the decision of community colleges to opt out of the Stafford loan program. Utilizing administrative records from over 50 community colleges located in a single state, [the author] estimates the within-college differences in outcomes for Pell-eligible students before and after an institution opts out of the federal loan program. [The author] finds that Pell-eligible students enrolling when the community college offered federal loans were 7.6 percentage points more likely to borrow than Pell-eligible students who enrolled when the institutions opted out. Overall, borrowing also increased by 368 US dollars a year. [The author] also finds that students borrowing a loan attempted 19 additional credits in their first year of enrollment and were more likely to attempt and complete math and science courses than non-borrowers.

Published abstract reprinted by permission of the copyright owner. Show less

Student financial aid - including grants and loans - plays a key role in supporting students' access to and success in college. Yet, despite periodic increases in grant funding, students and their families have increasingly relied on borrowing to cover more of the costs of higher education. As the number of student borrowers has increased and their cumulative indebtedness has grown, so too has concern about whether the resulting debt levels are manageable and about the long-term impact of student loan debt on other life choices and consumption patterns. Absent more complete data, policymakers have often focused on default rates, which are an incomplete measure of the range of experiences of contemporary students, including those who may have difficulties repaying their student loans. Default rates do not include the many borrowers who become delinquent on their federal education loans, but manage to avoid default. These borrowers face some of the same consequences as borrowers who default, but until now, the size and significance of this group has not been recognized or been part of the policy discussion about default prevention and financial literacy in general.

To better understand the impact of borrowing and student indebtedness, this report examines the repayment experiences of student loan borrowers using data provided by five of the largest student loan guaranty agencies. It examines more than 8.7 million borrowers with nearly 27.5 million loans who entered repayment between October 1, 2004 and September 30, 2009. The primary focus is on the nearly 1.8 million borrowers who entered repayment in 2005. This report is a snapshot of borrower experiences, but it can help inform policy discussions about student loan programs and the tools available to help borrowers avoid delinquency and default.

Excerpt from publication. Show less

The Canada Apprentice Loan offers interest-free loans of up to $4,000 per period of technical training (minimum request of $500). The lifetime maximum loan amount is $20,000 and/or a maximum of five periods of technical training. The program was designed to help registered Red Seal apprentices cover the costs related to their apprenticeship. This report constitutes Phase II of the Evaluation of the Canada Apprentice Loan. Phase I was completed in 2017 and covered program relevance, the use of the loans, administrative costs, and program delivery and awareness. Phase II expands on additional questions about loan repayment and the impact of the loan on completing an apprenticeship. This evaluation uses an impact analysis method to estimate the contribution of the loans on the completion of an apprenticeship.

Key findings include: (1) The loan contributes to completion of training; (2) There is a need for the Canada Apprentice Loan given that most apprentices continue to have difficulty making ends meet during technical training; (3) The Canada Apprentice Loan responds to the need of various sub-populations; (4) A higher than average proportion of women, Indigenous recipients, recipients with a disability and older recipients surveyed indicated that the loans were important or very important in covering the costs of training and other related expenses; (5) Approximately one-third (37.0 per cent) of apprentices surveyed are aware of the loan prior to registering; (6) Of this 37 per cent, one third (39.0 per cent) feel that knowing about the loan is an important part of their decision making to participate in an apprenticeship program. Most awareness about the program occurs after registering into a trade school; (7) The take up rate has been relatively stable since inception of the program. During the period between 2015 and 2017, approximately one-third of the eligible population used the loan. The average take-up rate of the Canada Apprentice Loan over this period was 31.6 per cent with a slightly higher rate for women (33.1 per cent); (8) A majority of the recipients surveyed are satisfied with the application process (78.6 per cent) and the timeliness (82.0 per cent) of the loan. This is consistent with the findings from Phase 1; (9) Between 2015 and 2017, 74.1 per cent of the loan recipients were also using both Apprenticeship Grants and Employment Insurance benefits. During the same period, only 4.0 per cent of the loan recipients were using the loan as their source of financial support; (10) On average, an apprentice has $5,534 of debt during training. A large majority (81.5 per cent) starting to repay before the end of their first year of training; and (11) In general, about 10 per cent of recipients start repaying their loan before completing their training. A small percentage of borrowers in repayment (1.7 per cent) are using the Repayment Assistance Program. This could be due to a low level of awareness about the Repayment Assistance Program.

Edited excerpts from publications. Show less

Since its introduction in 1989, the Higher Education Loan Program (HELP) has greatly expanded access to tertiary education in Australia. But with $52 billion of HELP debt outstanding, this report argues that the government has to find ways to control its costs. It is proposed that a 15 per cent loan fee on all new tertiary education lending could save the Commonwealth $700 million a year and make HELP more affordable for government. The fee would help to offset the government's interest costs, while being fair to all students and preserving the loan program's social goals. As now, there would be no upfront charges with a universal loan fee. The loan fee would be added to the student's total debt and would only affect graduates at the end of their repayment periods when their incomes are generally higher. And because of HELP's income contingent repayment system, students and graduates on low incomes would not have to repay their loan fee. But loan fees would encourage students who can afford to pay upfront to do so. Loan fees are both fair and necessary. Without change, HELP's costs will escalate, risking damaging cuts to other education programs.

Edited excerpts from publisher's website. Show less

The Higher Education Loan Programme (HELP) is a large and growing Australian government programme that supports participation in higher education by providing income-contingent concessional loans to students to assist with the costs in education. Although the costs of HELP are included in the budget financial statements, they are not separately identified to allow the impact of the programme on the budget to be readily assessed. The cost of the HELP is growing strongly, driven by the introduction of the demand driven approach to higher education funding, recently announced policy decisions to reduce subsidies for university courses and to allow universities to set their own course fees, and expansion of HELP loans to vocational education.

This report discusses the size and costs of HELP and provides an estimate of the impact of the programme on the underlying cash balance. The analysis in this paper is based on the government's announced policies as at the 2015-16 Mid-Year Economic and Fiscal Outlook (MYEFO), including those that are yet to be legislated.

Edited excerpts from publication. Show less