Student Loan Reforms for German Higher Education: Financing Tuition Fees

Bruce James Chapman () and Mathias Sinning

No 646, CEPR Discussion Papers from Centre for Economic Policy Research, Research School of Economics, Australian National University

Abstract: Due to the unknown future economic situation of students, private banks are unwilling to provide student loans in the absence of collateral. This market failure requires government intervention to prevent socially sub-optimal and regressive outcomes. Income contingent loans, whose repayment depends on the borrowers' future capacity to pay, can offer a possible solution to this problem. In this paper, we compare alternative income contingent loans for financing tuition fees at German universities. Several German states have introduced tuition fees at their universities since summer 2007 and publicly owned banks have started to offer student loans to cover these fees. Our empirical findings highlight the benefits of income contingent loans and demonstrate that tuition fees at German universities could increase considerably if an income contingent loan system would be implemented to provide students with the financial resources they need to pay these fees.

Keywords: Educational Finance; Student Financial Aid; State and Federal Aid; Government Expenditures on Education (search for similar items in EconPapers)
JEL-codes: H52 I22 I28 (search for similar items in EconPapers)
Date: 2010-11
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Related works:
Working Paper: Student Loan Reforms for German Higher Education: Financing Tuition Fees (2011)
Working Paper: Student Loan Reforms for German Higher Education: Financing Tuition Fees (2011)
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Persistent link: http://EconPapers.repec.org/RePEc:auu:dpaper:646

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