ERIC Number: ED341338
Record Type: RIE
Publication Date: 1991
Deferred Cost Recovery for Higher Education: Student Loan Programs in Developing Countries. World Bank Discussion Papers, No. 137.
Albrecht, Douglas; Ziderman, Adrian
This study analyzes the experience of existing higher education student loan programs in developing countries in order to understand their role in fostering cost recovery. Detailed financial analyses of 24 loan programs shows that present value of the repayments collected constitutes a small percentage of the loan value disbursed. In general, developing country loan programs to date have not reduced significantly the government's fiscal burden for higher education. In order to improve financial effectiveness, programs should be targeted toward the most needy and able students. Hidden subsidies should be limited by charging positive real interest rates, combined with repayment plans that take account of the likely pattern of graduate earnings. Larger programs may be more difficult to manage. Some countries have considered alternatives where the student pays for education from future income. The most notable is a graduate tax in which a student pays a fixed percentage of income over the entire working life, regardless of how much is repaid. With an effective tax system, this could bring in more revenue than traditional loan programs. Some income contingent payments may be more equitable for limiting risk to poorer students. In general, deferred cost recovery can help reduce government burdens, but only where institutional capacity exists. Two annexes present a checklist of policy options for deferred cost recovery and a method for calculating subsidies on mortgage loan programs. (46 references) (JB)
Descriptors: Access to Education, Cost Effectiveness, Developing Nations, Government Role, Government School Relationship, Higher Education, Income Contingent Loans, Loan Default, Loan Repayment, Paying for College, Student Loan Programs, Taxes
Publications Sales Unit, Department F, The World Bank, 1818 H Street, N.W., Washington, DC 20433 ($6.95).
Publication Type: Reports - Research; Information Analyses
Education Level: N/A
Authoring Institution: World Bank, Washington, DC.
Note: One of a series of discussion papers issued by the World Bank.