Financing Higher Education: International Lessons on Loan Repayment Burden
Explore insights from an international study on loan repayment burdens in higher education, with a focus on lessons for Ireland. The research delves into the concept of repayment burdens, drawing comparisons with global practices and highlighting policy implications. Discover key findings and recommendations for enhancing the financing landscape in Ireland.
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Presentation Transcript
Higher Education Financing International Experience: Loan Repayment Burden Lessons for Ireland Bruce Chapman Australian National University
Overview . collection rules: time OR income contingent; Reminder: basic difference between GGBLs and ICL is . research Repayment burdens of bank loans: meaning, history (Colombia 2005); importance and . Examples: The US, Vietnam and Thailand; . The Irish hypothetical illustration explained; . RBs for Ireland: Policy issues.
Repayment burden = (Loan Repayment)i/(Income)i . defaults; . What are ICL RBs (max by law: 10% Australia 9% England); . Where did all this come from (Colombia)? Why do RBs matter: consumption hardship and
US RBs for Low Income Borrowers (10th and 25th Quantiles) Males Repayment burdens 1.0 All Graduates (Q10) All Graduates (Q25) 0.9 Private Sector Lawyers (Q10) Private Sector Lawyers (Q25) 0.8 Public Sector Lawyers (Q10) Public Sector Lawyers (Q25) 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 1 2 3 4 5 6 7 8 9 10 Year
US RBs for Low Income Borrowers (10th and 25th Quantiles) Females Repayment burdens 1.0 All Graduates (Q10) All Graduates (Q25) 0.9 Private Sector Lawyers (Q10) Private Sector Lawyers (Q25) 0.8 Public Sector Lawyers (Q10) Public Sector Lawyers (Q25) 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 1 2 3 4 5 6 7 8 9 10 Year
Data: EU-SILC Data for the calculation of Earnings Profiles and Repayment Burdens come from the EU Survey of Income and Living Conditions This is an annual survey collected by the Central Statistics Office Earnings data are high quality due to administrative checks carried out by the CSO However, graduates seem to be under-represented in the survey (about 10% of sample, compared to 26% of workers in the QNHS) So needed to pool data for 2004-2011 to improve sample sizes Annual earnings were converted into 2015 values using quarterly CPI inflation figures For each possible number of years of labour market experience, various quantiles of the real earnings distribution were calculated the 10th, 25th, 50th, 75th and 90th
An Irish Hypothetical Loan Scheme Described and Illustrated Real and Nominal Repayments: 6000 fees pa, no maintenance, 10 years repayment 7000 6000 5000 4000 Nominal 3000 Real 2000 1000 0 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Age
Real and Nominal Repayments: 6000 fees pa, 6000 maintenance pa, 10 years repayment Real and Nominal Repayments: 6000 fees + 6000 maintenance 7000 6000 5000 4000 Nominal Real 3000 2000 1000 0 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36
Irish graduate male age-earnings profiles by quantile 100000 90000 80000 70000 60000 Q10 Q25 50000 Q50 40000 Q75 30000 20000 10000 0 0 5 10 15 20 25
Irish graduate female age-earnings profiles by quantile 60000 50000 40000 Q10 Q25 30000 Q50 Q75 20000 10000 0 0 5 10 15 20 25
RBs for Ireland Male graduates: E6000pa 0.7 0.6 0.5 0.4 Male, Q10 Male, Q25 0.3 Male, Q50 0.2 0.1 0 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 A g e
RBs for Ireland Female graduates: E6000pa 0.5 0.45 0.4 0.35 0.3 Female, Q10 0.25 Female, Q25 0.2 Female, Q50 0.15 0.1 0.05 0 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 A g e
RBs for Ireland Male graduates, E12000 pa Repayment Burden as Proportion of Earnings: 12,000pa, males 1.6 1.4 1.2 1 Male, Q10 0.8 Male, Q25 0.6 Male, Q50 0.4 0.2 0 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 A g e
RBs for Ireland Female graduates: 12000 pa 1.2 1 0.8 Female, Q10 0.6 Female, Q25 Female, Q50 0.4 0.2 0 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 A g e
RBs and an Irish mortgage loan system: Results and some reflections . will have very low RBs for low income graduates (upwards of 60%+ for many graduates); As with other countries an Irish mortgage-loan systems . 10%; An ICL could be designed with maximum RBs of 8- . IRS collection; graduates leaving Ireland with debts. Policy issues with an Irish ICL: rates of interest; prices;
Repayment Burden as Proportion of Earnings: 6000pa 0.35 0.3 0.25 0.2 Male, Q25 Male, Q50 0.15 Female, Q25 Female, Q50 0.1 0.05 0 22 23 24 25 26 27 28 29 30 31 Age
Repayment Burden as Proportion of Earnings: 12,000pa 0.8 0.7 0.6 0.5 Male, Q25 Male, Q50 0.4 Female, Q25 Female, Q50 0.3 0.2 0.1 0 22 23 24 25 26 27 28 29 30 31
Real and Nominal Repayments: 4500 fees, no maintenance 7000 6000 5000 4000 Nominal Real 3000 2000 1000 0 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36
Repayment Burden as Proportion of Earnings: 4500pa 0.25 0.2 0.15 Male, Q25 Male, Q50 0.1 Female, Q25 Female, Q50 0.05 0 22 23 24 25 26 27 28 29 30 31 Age
