Deferred Cost Recovery for Higher Education: Student Loan Programs in Developing Countries

Das stady analyzes the experience of existing higher education student loan programs in developing countries in order to understand their rolu in fostering cost recovery. Detailed financial analyses of 24 loan programs shows that presentivalne 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 fc,r education from future income. The most notable is a graduate tai 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 r:i.sk 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 recm:lry and a method for calculating subsidies on mortgage loan programs. (46 references) (JB) *********************************************************************** Reproductions supplied by EDRS are the best that can be made from the original document. *****c*******************************************x********************* 137 World Bank Discussion Papers Deferred Cost Recovery for Higher Education Student Loan Programs in Developing Countries Douglas Albrecht Adrian Ziderman PERMISSION TO REPRODUCE THIS MATERIAL IN! OTHER THAN PAPER COPY HAS BEEN GRANTED BY World Bank TO THE EDUCATIONAL RESOURCES INFORMATION CENTER (ERIC). 2 U.S. DEPARTMENT OP EDUCATION Office of Educehonel Rsearch end Improvement EDUCATIONAL RESOURCES INFORMATION CENTER (ERIC) )(This document hes been reproduced es received from the person or ofgenizahon ovonshrog it 0 Minot changes have boon made to imptove reproduction gushily Points of view of opinions stored in this docu. mnt do not necessarily represent official OERI position or pohcy