Scholarships or Student Loans? Subsidizing Higher Education in the Presence of Moral Hazard
AbstractStudent loans, even income-contingent ones, are not optimal. Potential university students with the appropriate characteristics should be offered a scholarship, dependent on both need and merit. The award of the scholarship should be conditional on the choice of university degree, but students with a natural aptitude for studies that do not hold the prospect of a well paid job should not be pushed towards potentially more lucrative ones. The scheme should be financed by a graduate tax that re-distributes from the better paid to the academically more successful.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 973.
Date of creation: 2003
Date of revision:
scholarships; student loans; graduate tax; principal-agent; moral hazard;
Other versions of this item:
- Alessandro Cigno & Annalisa Luporini, 2009. "Scholarships or Student Loans? Subsidizing Higher Education in the Presence of Moral Hazard," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(1), pages 55-87, 02.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- I28 - Health, Education, and Welfare - - Education - - - Government Policy
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