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Income Contingent Student Loans for Thailand : Alternatives Compared

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Author Info

  • Bruce Chapman

    (Crawford School of Government and Economics)

  • Kiatanantha Lounkaew

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

Paper provided by East Asian Bureau of Economic Research in its series EABER Working Papers with number 21950.

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Date of creation: Jan 2008
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Handle: RePEc:eab:wpaper:21950

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Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200
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Related research

Keywords: Thailand; Income Contingent Student Loans; higher education;

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References

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  1. Chapman, Bruce, 2006. "Income Contingent Loans for Higher Education: International Reforms," Handbook of the Economics of Education, Elsevier.
  2. Psacharopoulos, George & Patrinos, Harry Anthony, 2002. "Returns to investment in education : a further update," Policy Research Working Paper Series 2881, The World Bank.
  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. 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.
  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.
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Citations

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Cited by:
  1. 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.
  2. Chapman, Bruce & Sinning, Mathias, 2011. "Student Loan Reforms for German Higher Education: Financing Tuition Fees," IZA Discussion Papers 5532, Institute for the Study of Labor (IZA).
  3. 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.
  4. 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.
  5. 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.
  6. 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.

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