Financing schemes for higher education

Elena Del Rey and Maria Racionero

European Journal of Political Economy, 2010, vol. 26, issue 1, 104-113

Abstract: Most industrial countries have traditionally subsidized the provision of higher education. Alternative financing schemes, which rely on larger contributions from students, are being increasingly adopted. Those based on income-contingent loans provide insurance against uncertain educational outcomes. We consider a unified framework where we analyze the following schemes: 1) the traditional tax-subsidy, 2) pure loans, 3) income-contingent loans with risk-sharing, and 4) income-contingent loans with risk-pooling. We focus on their insurance role and their effect on higher education participation. We show that an income-contingent loan with risk-pooling can induce the optimal level of participation provided that it covers both financial costs of education and forgone earnings.

Keywords: Efficiency; Higher; education; finance (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (21)

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Working Paper: Financing schemes for higher education (2010)
Working Paper: Financing schemes for higher education (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:26:y:2010:i:1:p:104-113

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