A simulation of an income contingent tuition scheme in a transition economy |
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| Authors: | Milan Vodopivec |
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| Institution: | (1) The World Bank, Washington, DC 20433, USA;(2) Institute for the Study of Labor (IZA), Bonn, Germany |
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| Abstract: | The paper takes advantage of exceptionally rich longitudinal data on the universe of labor force participants in Slovenia
and simulates the working of an income contingent loan scheme that seeks to recover part of schooling costs. The simulations
show that under the base variant (where the target cost recovery rate is 20% and the contribution rate is 2%), 55% of individuals
would have repaid their entire debt within 20 years; 19% of individuals still would not have repaid any of their debt after
20 years; and the “leakage” of the scheme due to uncollected debt would have been 13.5% of total lending. By piggybacking
on existing administrative systems, implementation costs would be minimal, amounting to less than 0.5% of collected debt.
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| Keywords: | Income contingent loan Higher education Tuition Simulation |
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