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Income-Contingent Financing of Student Charges for Higher Education: Assessing the Australian Innovation

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Abstract

In Australia in 1989, for the first time in the world, a broadly-based income contingent loan policy for the payment of higher education charges was adopted, when the government introduced the Higher Education Contribution Scheme (HECS). This can be seen to be a watershed in terms of the relationship between economic theory and education policy. Fourteen years later it is timely to revisit the arguments for its introduction and review Australia's experience with income contingent charging for higher education. That is the purpose of this article. It is argued that compared to all possible alternatives, income contingent loan arrangements are preferable for both economic and social reasons, so long as the administrative context allows efficient collection of the debt. These points are explained in detail. The political background to HECS is examined, and the paper considers the implications of the scheme for both revenue and the access of the poor to higher education. It is demonstrated that neither the introduction of the scheme in 1989 nor the radical modifications undertaken in 1997 have had any deleterious consequences for the participation of less advantaged students.

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  • Bruce Chapman & Chris Ryan, 2002. "Income-Contingent Financing of Student Charges for Higher Education: Assessing the Australian Innovation," CEPR Discussion Papers 449, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  • Handle: RePEc:auu:dpaper:449
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    File URL: https://www.cbe.anu.edu.au/researchpapers/cepr/DP449.pdf
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    Cited by:

    1. 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.
    2. Bruce Chapman & Mark Rodrigues & Chris Ryan, 2008. "An Analysis of FEE-HELP in the Vocational Education and Training Sector," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 41(1), pages 1-14, March.
    3. Gillian Beer & Bruce Chapman, 2004. "HECS System Changes: Impact on Students," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 11(2), pages 157-174.
    4. Chapman, Bruce & Lounkaew, Kiatanantha & Polsiri, Piruna & Sarachitti, Rangsit & Sitthipongpanich, Thitima, 2010. "Thailand's Student Loans Fund: Interest rate subsidies and repayment burdens," Economics of Education Review, Elsevier, vol. 29(5), pages 685-694, October.
    5. Berlinger, Edina, 2005. "A nyugdíjrendszer és a diákhitelrendszer összekapcsolása
      [Connecting the pension and student-loan systems]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 631-647.
    6. Pierre Courtioux, 2008. "How Income Contingent Loans could affect Return to Higher Education: a microsimulation of the French Case," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00369986, HAL.
    7. Chapman, Bruce, 2006. "Income Contingent Loans for Higher Education: International Reforms," Handbook of the Economics of Education, Elsevier.
    8. Eliza Ahmed & Valerie Braithwaite, 2004. "When Tax Collectors Become Collectors for Child Support and Student Loans: Jeopardizing the Revenue Base?," Kyklos, Wiley Blackwell, vol. 57(3), pages 303-326, August.
    9. Chapman, Bruce & Ryan, Chris, 2005. "The access implications of income-contingent charges for higher education: lessons from Australia," Economics of Education Review, Elsevier, vol. 24(5), pages 491-512, October.
    10. Piruna Polsiri & Rangsit Sarachitti & Thitima Sitthipongpanich, 2008. "Thailand’s Student Loan Fund : An Analysis of Interest Rate Subsidies and Repayment Hardships," EABER Working Papers 21952, East Asian Bureau of Economic Research.
    11. Bruce Chapman & Mark Rodrigues & Chris Ryan, 2007. "HECS for TAFE: The case for extending income contingent loans," Treasury Working Papers 2007-02, The Treasury, Australian Government, revised Apr 2007.
    12. Bruce Chapman, 2008. "The Australian University Student Financing System : The Rationale for, and Experience with, Income Contingent Loans," EABER Working Papers 21944, East Asian Bureau of Economic Research.

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