Income Contingent Loans: Theory, Practice And Prospects (international Economic Association Series)

This study explores the prospect of the application of the basic principles of ICL into many other potential areas of social and economic policy. Using case studies it evaluates previously implemented ICL schemes where interest rate subsidies are usually the norm, and questions the merits of this approach. As an income contingent loans bill is considered by the US Congress, income contingent loans (ICL) have risen to the forefront of economic discourse. ICLs are collected through the income taxation system and are repaid only when future incomes exceed a specified level. ICLs were first introduced in Australia in 1989 to help college students finance their tuition costs, and since then many countries have followed this policy approach. Bruce Chapman, Timothy Higgins and Joseph E. Stiglitz along with a host of internationally recognised experts who have been instrumental in impacting national policy in this field, explore the theory of ICLs, and the prospect of applying the basic principles to many other potential areas of social and economic policy such as paid parental leave; recompensing poor countries for skilled migrant emigration; legal aid for civil disputes; business innovation for small and medium enterprises; out-of-pocket health care expenditure needs; and for periods of unemployment. The text describes an alternative approach to ICLs, which takes the form of human capital contracts or graduate taxes, as well as examining hybrid schemes that combine the attractive aspects of both arrangements. Case studies are used to examine the prospects for ICLs for higher education in Malaysia, Germany, Thailand, Chile and Colombia, and there is discussion of the barriers for adoption of ICLs in countries that lack efficient institutions for debt collection. A key message from the contributions is that in countries with appropriate institutions for taxation administration, there are considerable transactional efficiencies associated with ICLs. These efficiencies, combined with the improvements in risk and incentives that well-designed ICL programs can provide, suggest that such programs can play an important role in a modern welfare state Front Matter....Pages i-x Introduction and Summary....Pages 1-11 Income Contingent Loans: Background....Pages 12-28 Front Matter....Pages 29-29 Remarks on Income Contingent Loans: How Effective can they be at Mitigating Risk?....Pages 31-38 Income Contingent Loans as a Risk Management Device....Pages 39-48 Income Contingent Loans: Toward a Piecewise Linear Scheme....Pages 49-60 Front Matter....Pages 61-61 Income Contingent Loans and Higher Education Financing: Theory and Practice....Pages 63-75 The Challenge of Sustaining Student Loans Systems: Lessons from Chile and Colombia....Pages 76-82 The Implications of Graduate Labor Market Performance in Designing a Student Loan Scheme for Malaysia....Pages 83-97 Modeling Aggregate Loans Recovery of the Student Loans Fund in Thailand....Pages 98-108 Why Don’t We Just Give Them the Money? Financing Living Expenses of Students in Germany....Pages 109-124 Front Matter....Pages 125-125 Improving Paid Parental Leave through Income Contingent Loans....Pages 127-135 Internationalisation of ICLs to deal with Human Capital Trade Imbalances....Pages 136-141 The Role of Contingent Loans in Providing Equitable Access to Legal Aid....Pages 142-155 Income Contingent Loans for Business Innovation....Pages 156-164 Using Income Contingent Loans to Pay for Health Care....Pages 165-171 Elderly Support Policies as Resource Contingent Loans....Pages 172-179 Income Contingent Loans for the Unemployed: A Prelude to a General Theory of the Efficient Provision of Social Insurance....Pages 180-204 Front Matter....Pages 205-205 Overemphasized Costs and Underemphasized Benefits of Income Contingent Financing....Pages 207-215 Aid Programs for Higher Education....Pages 216-222 Income Contingent Loans for Higher Education and Beyond....Pages 223-237 Front Matter....Pages 205-205 Why Don’t We See More Use of Income Contingent Loans?....Pages 238-240 Future Directions for Income Contingent Loan Theory....Pages 241-247 Utilising the Transactional Efficiencies of Contingent Loans — A General Framework for Policy Application....Pages 248-259 Back Matter....Pages 260-273