Higher education finance: overview of existing education finance models and scheme
2011-11-07 – Higher education systems in many countries have been increasingly affected by tightening government budgets, leading to an increasing need for cost-sharing in higher education. The private sector, in particular the students themselves, is now increasingly sharing in the costs for attending higher education, e.g. through bearing the costs for tuition fees. The global trend in cost-sharing leads to a rising demand for student financing schemes, in particular student loans. To meet the demand for such financing schemes, innovative ways are required to attract private capital on a larger scale for higher education finance.
The study looks at different types and general characteristics of higher education systems and briefly outlines common interlinkages between education systems and labor markets. The analysis then focuses on different student financing schemes and provides a definition of the relevant elements of such schemes. The study concludes with an overview of higher education finance initiatives and programs of international organizations and development finance institutions.
The main findings of the study comprise the following:
- The majority of existing student loan schemes is government-sponsored and highly subsidized. Purely private/commercial schemes are only accessible for the most credit-worthy students and thus achieve limited outreach.
- Many programs are poorly designed and implemented and, as a result, suffer from a low repayment performance of the loans issued.
- Student loan programs may require some continuing subsidization. Therefore, there is ample scope for applying “smart subsidies” and leveraging public capital.
- Private-public partnerships could play a particular role in mitigating the specific risks student loans are associated with through, for instance, innovative risk-sharing facilities.
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