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A Simulation of an Income Contingent Tuition Scheme in a Transition Economy


  • Vodopivec, Milan

    () (University of Primorska)


The paper takes advantage of exceptionally rich longitudinal data on the universe of labor force participants in Slovenia and simulates the working of an income contingent loan scheme to partly recover tuition costs. The simulations show that under the base variant (where the target cost recovery rate is 20 percent and the contribution rate is 2 percent), 55 percent of individuals would have repaid their entire debt within 20 years; 19 percent of individuals still would not have repaid any of their debt after 20 years; and the "leakage" of the scheme due to uncollected debt would have been 13.5 percent of total lending. By piggybacking on existing administrative systems, implementation costs would be minimal, amounting to less than 0.5 percent of collected debt.

Suggested Citation

  • Vodopivec, Milan, 2004. "A Simulation of an Income Contingent Tuition Scheme in a Transition Economy," IZA Discussion Papers 1247, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp1247

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    References listed on IDEAS

    1. Barr, Nicholas, 2001. "The Welfare State as Piggy Bank: Information, Risk, Uncertainty, and the Role of the State," OUP Catalogue, Oxford University Press, number 9780199246595.
    2. John Haltiwanger & Milan Vodopivec, 2002. "Worker Flows, Job Flows and Firm Wage Policies: An Analysis of Slovenia," William Davidson Institute Working Papers Series 486, William Davidson Institute at the University of Michigan.
    3. Chapman, Bruce, 1997. "Conceptual Issues and the Australian Experience with Income Contingent Charges for Higher Education," Economic Journal, Royal Economic Society, vol. 107(442), pages 738-751, May.
    4. Orazem, Peter F. & Vodopivec, Milan, 1997. "Value of human capital in transition to market: Evidence from Slovenia," European Economic Review, Elsevier, vol. 41(3-5), pages 893-903, April.
    5. Evan Kraft & Milan Vodopoviec, 2003. "The new kids on the block: The entry of private business schools in transition economies," Education Economics, Taylor & Francis Journals, vol. 11(3), pages 239-257.
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    Cited by:

    1. Darragh Flannery & Cathal O’Donoghue, 2011. "The Life-cycle Impact of Alternative Higher Education Finance Systems in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 42(3), pages 237-270.

    More about this item


    education; income contingent loan; tuition; simulation;

    JEL classification:

    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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