Search Results

This article aims to explore the ground realities of implementation of the Vocational Training Loan Scheme through interviews with the various stakeholders involved including training service providers, bankers, students etc. The article is a preliminary exploration of issues that the implementing bodies face in promoting this scheme. It finds that one of the major challenges of the scheme is that banking systems are still not accessible to prospective applicants as they view banking and loan as intimidating processes. The article concludes that though the Vocational Training Loan Scheme shows great potential, it can deliver its services only if the service delivery agencies become more accessible to its beneficiaries. In the light of some of the current flagship skill development schemes offering free training, administering a loan product for the same target audience would be a challenge.

Published abstract. Show less

The plight of underemployed college graduates struggling to make their student loan payments has received a great deal of media attention throughout the recent economic recession. The primary safety net available to borrowers of federal loans facing unaffordable monthly payments is income-based repayment, in which borrowers make monthly payments based on their earnings rather than a traditional schedule of flat payments. The importance of these programs is widely recognized. How much these programs will cost and how the benefits will be distributed among borrowers, however, is not well understood - in large part because these costs and benefits will be realized over multiple decades. Without this knowledge, it is difficult to know whether these programs are meeting the goal of effectively and efficiently protecting borrowers without creating significant unintended consequences.

This report seeks to fill that gap by providing some of the first detailed evidence about the predicted costs and benefits of existing income-based repayment programs. [The] authors develop an empirical framework for understanding the costs and benefits of these programs and use simulation methods to apply this framework to a nationally representative sample of bachelor's degree recipients. These methods cannot accurately estimate the overall cost of the programs, but they provide fairly robust estimates of the relative cost of different program components, and of the share of benefits received by different groups of borrowers. This analysis produces several noteworthy findings: (1) the core mission of income-based repayment systems - allowing borrowers to pay off their loans over a longer period of time based on their income - accounts for only one-quarter to one-third of overall program costs; (2) the forgiveness of remaining debt after set periods of participation in income-based repayment generates approximately half of overall program costs; (3) existing programs effectively target borrowers with low incomes, with three-quarters of benefits accruing to borrowers with incomes in the lowest quartile; (4) bachelor's degree recipients who attend more expensive colleges receive a disproportionate share of benefits.

These findings suggest that existing programs may be as much as four times more costly than they need to be to accomplish their core mission of protecting borrowers from unaffordable monthly payments. Not only is loan forgiveness unnecessary for ensuring that monthly payments are affordable for borrowers, loan forgiveness creates incentives for students to borrow too much to attend college, potentially contributing to rising college prices for everyone. This is highlighted by the finding that graduates of expensive colleges receive the largest benefits of income-based repayment. For these reasons, [the authros] recommend that policy makers revise the existing income-based repayment programs to eliminate forgiveness, or at least significantly reduce its generosity. Likewise, policy makers should replace the Public Service Loan Forgiveness Program, in which the debts of borrowers in the public- and non-profit sectors are forgiven after 10 years, with a more efficient and equitable program for subsidizing the wages of individuals in these sectors of the economy.

Summary from publisher’s website. Show less

Funding for universities changed significantly in 2012. Students are now expected to repay a much greater proportion of the costs of their higher education upon graduation, as government has switched most of the teaching grant into tuition fees. But the new system is not just about the level of tuition fees and its impact on applications. It has brought with it significant changes to the loans used by most young people to cover the cost of going to university. With higher fees, students graduate with average debts in excess of 40,000 pounds, nearly twice what they owed previously. It is true that repayments now start at a higher level of income than before. But it is also the case that the loans now have a real rate of interest, one that is charged from the first year at university.

This report explores the full impact of these changing debts. The findings bring mixed news for the graduates from the new fees regime. In their 20s and 30s, graduates will on average pay less than under the old system. Those who earn the least during their lifetime will probably have most of their debts eventually written off. But whereas graduates might previously have hoped to pay off all their debts by their late 30s, most will now continue to be paying back their student loan until their early 50s.

Edited excerpts from publication. Show less

In New Zealand, people studying for a tertiary qualification are, in the main, entitled to take out a student loan to fund their study. Unlike some other countries, student loans in New Zealand are interest-free, and there is no obligation to start paying back the loan until the person’s income reaches a threshold. This report looks at student loan borrowers living in New Zealand 20 to 50 years of age with pre-study incomes below the student loan repayment threshold.

Key findings are that: (1) the average incomes of these New Zealand student loan borrowers, and their rate of increase in income, are higher if they complete a higher-level qualification like a diploma or bachelors degree, compared to those who complete a certificate-level qualification; (2) women generally have lower average graduate incomes, and lower rates of increase in their income compared to men, although older women completing bachelors degrees have higher income trajectories than their male counterparts; (3) those on a benefit, indicating some difficulty in accessing the labour market, generally have smaller increases in income on completing the same level of qualification, and relatively flat rates of increase in income after graduating, compared to those not on a benefit, on average; (4) younger graduates generally have higher rates of increase in their incomes than older graduates, on average; and (5) average incomes increase with time, generally. These factors and their interactions are associated with both whether a low-income student loan borrower living in New Zealand crosses the loan repayment threshold, that is, has an income after study that obliges them to start repaying their student loan, and the timing of when this occurs.

Younger men generally have average incomes which are above the loan repayment threshold one year after completing a qualification at any level, and under most circumstances, men have average incomes above the threshold after some years even if they don’t complete their qualification. Only women who complete diploma or bachelors degrees have average incomes above the repayment threshold soon after graduating, though in the longer term, most women’s average graduate incomes cross the repayment threshold, although it is only just above the threshold for those who complete lower-level qualifications. If any individual student loan borrower finds ongoing paid employment after completing their study, they are likely to have an income above the student loan repayment threshold. It is therefore the interplay between their access to the labour market, and how that is facilitated by their qualification, and their personal characteristics and circumstances, which will determine whether they will have sufficient income to be obliged to repay their student loan.

Edited excerpts from publication. Show less