The feasibility of student loans in Latin America : a simulation

Over the next 20 years the demand for education will rise considerably in Latin America, because of population growth and increasing enrollment ratios. The demand for higher education will rise especially fast, given increasing basic education enrollment ratios and current low enrollment rates in higher education. Because unit cost for higher education are relatively high (compared with basic education), the demand for expenditures (public and private) on higher education will rise even more. Unfortunately, most Latin America governments find it difficult even now to adequately finance education. Alternative financial resources must be found. Student loan programs for higher education are one promising means of mobilizing additional financial resources. Such programs can improve the efficiency, equity, and stability of higher education expenditures. There are also numerous alternative means of financing higher education. However, none of the alternatives maximize the same extent as a loan program the desired criteria for higher education financing. The paper presents an applied theoretical analysis which estimates the practicality and concrete benefits of a student loan program.