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Income contingent student loans for Thailand: Alternatives compared

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  • Chapman, Bruce
  • Lounkaew, Kiatanantha

Abstract

There is significant irresolution in many countries concerning the design of student loan schemes. In no country recently has there been more uncertainty as to the form that loans should take than Thailand. The Student Loans Fund (SLF), a conventional approach to financing, was introduced in 1996, discontinued at the end of 2005, and re-introduced in 2007. In its place an income contingent loan (ICL) was implemented for one year only, 2006. As part of this debate we contribute to an understanding of the repayment burdens associated with the SLF in Chapman, Lounkaew, Polsiri, Sarachitti and Sitthipongpanich (in this issue). There are important issues with all ICL, and in this paper we consider the critical matter of interest rate subsidies. These are calculated for four different possible ICL arrangements for Thailand: the Thai Income Contingent and Allowance Loan (TICAL), a variant of TICAL, and two alternatives. With a broad-brush approach the subsidies for TICAL-type arrangements and for current debt levels turn out to be between 25 and 40 per cent, but are about zero for our suggested alternative ICLs. Using a better, more disaggregated, approach, subsidies for TICAL-type schemes are estimated to be about 30-55, and 3 and 18 per cent for our alternative ICLs. But with very large debts, the subsidies of all schemes are very high, implying that ICL are likely to be expensive until Thai graduate incomes rise. Importantly for equity however, the interest rate subsidies are delivered to graduates with relatively low lifetime incomes.

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Bibliographic Info

Article provided by Elsevier in its journal Economics of Education Review.

Volume (Year): 29 (2010)
Issue (Month): 5 (October)
Pages: 695-709

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Handle: RePEc:eee:ecoedu:v:29:y:2010:i:5:p:695-709

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Web page: http://www.elsevier.com/locate/econedurev

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Keywords: Educational finance Student financial aid State and federal aid;

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References

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  1. Bruce Chapman & Andrew Leigh, 2006. "Do Very High Tax Rates Induce Bunching? Implications for the Design of Income-Contingent Loan Schemes," CEPR Discussion Papers 521, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  2. Chapman, Bruce, 2006. "Income Contingent Loans for Higher Education: International Reforms," Handbook of the Economics of Education, Elsevier.
  3. Pedro Carneiro & James J. Heckman, 2002. "The Evidence on Credit Constraints in Post--secondary Schooling," Economic Journal, Royal Economic Society, vol. 112(482), pages 705-734, October.
  4. George Psacharopoulos & Harry Anthony Patrinos, 2004. "Returns to investment in education: a further update," Education Economics, Taylor & Francis Journals, vol. 12(2), pages 111-134.
  5. Johnstone, D. Bruce, 2004. "The economics and politics of cost sharing in higher education: comparative perspectives," Economics of Education Review, Elsevier, vol. 23(4), pages 403-410, August.
  6. Bruce Chapman & Kiatanantha Lounkaew & Piruna Polsiri & Rangsit Sarachitti & Thitima Sitthipongpanich, 2009. "Thailand’s Student Loan Fund: An Analysis of Interest Rate Subsidies and Repayment Hardships," CEPR Discussion Papers 592, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  7. Dynarski, Mark, 1994. "Who defaults on student loans? Findings from the National Postsecondary Student Aid Study," Economics of Education Review, Elsevier, vol. 13(1), pages 55-68, March.
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Citations

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Cited by:
  1. Migali, Giuseppe, 2012. "Funding higher education and wage uncertainty: Income contingent loan versus mortgage loan," Economics of Education Review, Elsevier, vol. 31(6), pages 871-889.
  2. Chapman, Bruce & Liu, Amy Y.C., 2013. "Repayment burdens of student loans for Vietnamese higher education," Economics of Education Review, Elsevier, vol. 37(C), pages 298-308.
  3. Schwager, Robert, 2012. "Student loans in a tiebout model of higher education," Center for European, Governance and Economic Development Research Discussion Papers 137, University of Goettingen, Department of Economics.
  4. Adam Booij & Edwin Leuven & Hessel Oosterbeek, 2008. "The Role of Information in the Take-up of Student Loans," Tinbergen Institute Discussion Papers 08-039/3, Tinbergen Institute.
  5. Higgins, Tim & Sinning, Mathias, 2013. "Modeling income dynamics for public policy design: An application to income contingent student loans," Economics of Education Review, Elsevier, vol. 37(C), pages 273-285.
  6. Bruce Chapman & Kiatanantha Lounkaew & Piruna Polsiri & Rangsit Sarachitti & Thitima Sitthipongpanich, 2009. "Thailand’s Student Loan Fund: An Analysis of Interest Rate Subsidies and Repayment Hardships," CEPR Discussion Papers 592, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  7. Bruce Chapman & Kiatanantha Lounkaewa, 2010. "Repayment Burdens with US College Loans," CEPR Discussion Papers 647, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  8. Bruce Chapman & Mathias Sinning, 2010. "Student Loan Reforms for German Higher Education: Financing Tuition Fees," CEPR Discussion Papers 646, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  9. Schwager, Robert, 2012. "Student loans in a tiebout model of higher education," Center for European, Governance and Economic Development Research Discussion Papers 137, University of Goettingen, Department of Economics.

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