What Do Microsimulations Tell Us about Fiscal Costs of the Newly Launched Income Contingent Loans in Japan?

Masaaki Kawagoe, Yukiko Ito and Masato Takara

ESRI Discussion paper series from Economic and Social Research Institute (ESRI)

Abstract: This study estimates the fiscal costs incurred by the income contingent loans launched in April 2017 using a microsimulation approach. The study identifies three factors to understand how costly the loan scheme is: discount rate, female working conditions, and income mobility. The largest costs include about 40% of the mean loan outstanding at the time of graduation that would not be repaid in present discount value terms. This amount may be reduced as the discount rate falls from 2%, as more married females continue working at higher wages, and as more income dynamics are introduced, such as changes in the percentiles of income distributions during individuals’ lives. The costs would be, on average, 20 percentage points higher than their fixed repayment counterparts.

Keywords: microsimulation; income contingent loan; higher education; fiscal costs JEL classifications: D14; I22; I23; I28; J22 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2018-01
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Citations: View citations in EconPapers (1)

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