Deferred and Income-contingent Tuition Fees: An Empirical Assessment using Belgian, German and UK Data

Vincent Vandenberghe and O. Debande

Education Economics, 2007, vol. 15, issue 4, 421-440

Abstract: This paper is a numerical exploration of the following. Assume, in the European Union context, that decision-makers want to spend more on higher education via higher tuition fees, but also want payments to be deferred and income-contingent. There are several possible ways to achieve this. First, ask graduates to repay a fixed amount each year if their current net income is above a certain threshold—income-contingent loans (ICL). Second, ask former students to repay a fixed proportion of their income—human capital contracts (HCC). What are the respective distributional properties of these policies, and how do they compare with traditional financing through income taxation? This paper shows that, irrespective of major variations between countries with different higher education, labour market and fiscal structures, with income taxation non-graduates pay more that 50% of the increased higher-education costs. It also shows that the HCC and ICL have vertical equity properties because non-graduates do not pay, but also because the income contingency principle on which they are based redistributes income among heterogeneous graduates. Finally, the paper shows that HCC are the best way to take account of graduates' ability to pay. It also reveals, however, that the ICL can be made to be almost as equitable.

Keywords: Higher education finance; income-contingent loans; risk pooling (search for similar items in EconPapers)
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.tandfonline.com/10.1080/09645290701409889 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:edecon:v:15:y:2007:i:4:p:421-440

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/CEDE20

DOI: 10.1080/09645290701409889

Access Statistics for this article

Education Economics is currently edited by Caren Wareing and Steve Bradley

More articles in Education Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().