Student Loans: Liquidity Constraint and Higher Education in South Africa

Gurgand, Marc; Lorenceau, Adrien; Melonio, Thomas

doi:10.2139/ssrn.1969424

Cited by 22 publications

(16 citation statements)

References 27 publications

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“…Also using a regression discontinuity approach, Gurgand et al (2011) find evidence that the enrolment to college of households without access to student loans is 20 percentage points lower in South Africa. Regarding the Colombian case, Melguizo et al (2015) find evidence that the implementation of a massive government loan program in the past decade, which is the topic of this paper, did increase student enrolment.…”

Section: The Role Of Borrowing Constraintsmentioning

confidence: 98%

The Effects of Student Loans on the Provision and Demand for Higher Education

Azuero

Valencia

2017

SSRN Journal

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We characterize the outcomes of the tertiary education market in a context where borrowing constraints bind, there is a two-tier college system operating under monopolistic competition in which colleges differ by the quality offered and returns to education depend on the quality of the school attended. College quality, tuition prices, acceptance cut-offs and education demand are all determined in a general equilibrium model and depend on the borrowing constraints faced by households. Our main finding shows that subsidized student loan policies can lead to a widening gap in the quality of services provided by higher education institutions. This happens because the demand for elite institutions unambiguously increases when individuals can borrow. This does not happen in non-elite institutions, since relaxing borrowing constraints makes some individuals move from non-elite to elite institutions. The higher increase in demand for elite institutions allows them to increase prices and investment per student. As investment and average student ability are complementary inputs in the quality production function, elite universities also increase their acceptance cut-offs. In this new equilibrium, the differentiation of the product offered by colleges increases, where elite universities provide higher quality to high-ability students and non-elite universities offer lower quality to less-able students. We illustrate the main results through a numerical exercise applied to Colombia, which implemented massive student loan policies during the last decade and experienced an increase in the gap of quality of education provided by elite and non-elite universities. We show that the increase in the quality gap can be a by-product of the subsidized loan policies. Such results show that, when analyzed in a general equilibrium setting, subsidized loan policies can have regressive effects on the income distribution.JEL Classification: E24, I23, I24, I25, I28,L130

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Section: The Role Of Borrowing Constraintsmentioning

confidence: 98%

The Effects of Student Loans on the Provision and Demand for Higher Education

Azuero

Valencia

2017

SSRN Journal

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“…Feedback from faculty‐student engagement meetings during the protests of the past two years suggests that students who drop out typically report being financially constrained as the main reason for discontinuing their studies. Despite the university's efforts on financial aid policies, it appears that liquidity constraints are still binding for a non‐negligible number of students, consistent with the results of a study of all universities in the country (Gurgand et al ., ). This could help explain, at least partly, the lower graduation rates of AA beneficiaries we observe in our data.…”

Section: Academic Outcomes For Applicationsmentioning

confidence: 99%

Estimating the Size and Impact of Affirmative Action in Undergraduate Admissions at the University of Cape Town

Kerr

Piraino

Ranchhod

2017

South African J Economics

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In this paper, we estimate the extent and targeting of affirmative action at the University of Cape Town (UCT), a large public university in South Africa. To do this we use admissions data from the UCT, as well as South African population census data and administrative enrolment and graduation data from the South African Department of Higher Education. We find that affirmative action does have a significant effect on the racial distribution of who is made an offer by the university. We also find that affirmative action is well targeted, with those who we estimate to be beneficiaries being of much lower socioeconomic status than those who we estimate are displaced by affirmative action. Beneficiaries of affirmative action have low graduation rates on average, with those beneficiaries who attend UCT being less likely to graduate than those beneficiaries who enrol at other public universities.

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“…NSFAS in South Africa awards means tested loans between ZAR 2,000 (US$247) and ZAR 32,500 (US$4, 017). The interest rate is relatively high as it includes both inflation and two-percentage-points, with no in-school interest subsidy (Gurgand et al, 2011). Students who pass all of their courses may qualify for a 40 percent rebate on their loans, and those who pass half of their courses may quality for a 20 percent rebate.…”

Section: South Africamentioning

confidence: 99%

Shifting from Government Bursaries to a Loan Scheme in Higher Education: Exploring the Zambian Experience in Student Financial Aid

Masaiti¹,

Mwelwa²,

Mwale³

2016

IJAHE

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One of the current critical issues in higher education in Africa and globally is about making student loans available in a sustainable and cost-effective manner. The argument is more complicated for Africa because of the complexities associated with loan schemes and the general austerity that African countries find themselves in. This article presents a case study and conceptualizes the scenario of shifting government bursaries to a student loan scheme in Zambia's higher education sector. Based on student views (N=729) and international experience, the article presents student reactions to the announcement of the implementation of the loan scheme in Zambia. Other issues explored in detail include cost-effectiveness and sustainability, loan conditionalities and forms of assistance to poor students. The article also highlights, and provokes policymakers with, questions on student loan schemes based on international experience. These are related to the modalities of who bears the ultimate risks; when and how to make the recoveries; and difficulties associated with "means testing"

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Student Loans: Liquidity Constraint and Higher Education in South Africa

Cited by 22 publications

References 27 publications

The Effects of Student Loans on the Provision and Demand for Higher Education

The Effects of Student Loans on the Provision and Demand for Higher Education

Estimating the Size and Impact of Affirmative Action in Undergraduate Admissions at the University of Cape Town

Shifting from Government Bursaries to a Loan Scheme in Higher Education: Exploring the Zambian Experience in Student Financial Aid

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