Enlarging the social basis of higher education: Lessons learned from extending a social support system with a risk-sharing loan scheme in Portugal

The challenge of enlarging the social basis of higher education during a period of recession and economic and budgetary problems is discussed with particular reference to Portugal in terms of extending a social support system for low-income students through a risk-sharing loan scheme introduced in 2007. The social support system in Portugal, which was significantly enlarged until 2010 to cover more than 20% of the total higher education population (i.e., about 70 thousand students), has been considered a rather successful and relevant policy tool for opening up access to higher education. On the other hand, in its initial years of operation, the new system of student loans was characterized by a low penetration rate, with a total of about 21 thousand student loans being issued in the period 2007–2014. However, it has been very relevant because it has facilitated the introduction of a “new culture” of investment in higher education. The new system involves a risk-sharing scheme with a mutual guarantee underwritten by the State involving the banking industry. It follows the practice of mortgage-type student loans in other countries but includes an innovative element of mutuality, which was key to making use of private finance at a time when a further extension of public funds was impossible. It complements existing social support grants, rather than replacing them, and hence improves equity in access to higher education by extending students' options. Its low take-up rate can be attributed to: i) the relatively large penetration and number of advantages of the public social support system; ii) student and family concerns over defaults; and iii) restrictions by the lending institutions in association with the financial crisis, which have had particularly large implications for the banking industry.