Income contingent student loan design: Lessons from around the world

Optimal investment in human capital under migration uncertainty

“…ICLs can be used to mitigate credit constraints that students face and can be a more effective and equitable tool to address skills investments than tax deductions and credits for skills expenses (OECD, 2017). Several countries, notably Sweden, the UK, Australia, and New Zealand, have introduced ICLs with different characteristics such as repayment rates, repayment thresholds, and debt forgiveness periods (Britton et al, 2019). These loan characteristics, together with graduates’ level of indebtedness, determine who among the graduates bear the costs of education and whether the cross‐subsidization is high among graduates (Britton et al, 2019).…”

“…Several countries, notably Sweden, the UK, Australia, and New Zealand, have introduced ICLs with different characteristics such as repayment rates, repayment thresholds, and debt forgiveness periods (Britton et al, 2019). These loan characteristics, together with graduates’ level of indebtedness, determine who among the graduates bear the costs of education and whether the cross‐subsidization is high among graduates (Britton et al, 2019). Poutvaara (2004) develops a model which investigates the role of graduate taxes 19 and ICLs in providing education in internationally applicable skills (i.e.…”

“…20 For instance, consider the case of an Australian student who might wish to continue his/her education in New Zealand due to more favorable ICL conditions and little effort required to accumulate local human capital. We refer the interested reader to Britton et al (2019) who provide an overview of ICL conditions in various countries. 21 Rent-seeking in Epstein et al (1999) takes the form of seeking privileges to have closer connections to the ruler class in the home country.…”

Reflections on the US College Loans System: Lessons from Australia and England

“…The taxpayer subsidy would be slightly larger if the correlation was less than the 0.3 assumed in our simulations, and particularly if debt and income were negatively correlated. With large student loans (such as those in the UK) the taxpayer subsidies involved in an ICL can be relatively large regardless of assumptions about income dynamics (see Britton, van der Erve and Higgins, 2019). Finally we are estimating the costs of the ICL based on individual gross earnings from labour income.…”

Women pay their way on income contingent student debt

“…Australia introduced the first income contingent loan (ICL) scheme to broaden higher education access and reduce the financial burden of higher education provision on government over 30 years ago. Other countries with well-established full or partial ICL schemes include England, New Zealand, the Netherlands, South Korea and Hungary (Britton et al., 2018). The ICL scheme has progressive income thresholds for repayment.…”