IDEAS home Printed from https://ideas.repec.org/a/eee/ecoedu/v71y2019icp95-108.html
   My bibliography  Save this article

Repayment burdens of mortgage-style student loans in China and steps toward income-contingent loans

Author

Listed:
  • Cai, Yu
  • Chapman, Bruce
  • Wang, Qing

Abstract

Currently China is experiencing unprecedented growth in higher education enrolments, with this trend set to continue. Whether higher education financing policy is able to facilitate this expansion is a critical issue for both education outcomes and economic growth. Using cross-sectional earnings data from the Chinese Household Income Project we find that a significant proportion of low-income graduates have a high likelihood of experiencing financial difficulties with current loan arrangements, implying high levels of financial hardship, a reliance on family members to meet repayments in order to avoid difficulties, and for some, default. In contrast we show that a properly designed income-contingent loan scheme has the potential to significantly mitigate, even eliminate, these concerns without attendant high budgetary costs. Our findings have important policy implications for Chinese higher education financing.

Suggested Citation

  • Cai, Yu & Chapman, Bruce & Wang, Qing, 2019. "Repayment burdens of mortgage-style student loans in China and steps toward income-contingent loans," Economics of Education Review, Elsevier, vol. 71(C), pages 95-108.
    • Handle: RePEc:eee:ecoedu:v:71:y:2019:i:c:p:95-108
    DOI: 10.1016/j.econedurev.2018.10.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0272775717302078
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econedurev.2018.10.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. David Card & Thomas Lemieux, 2001. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(2), pages 705-746.
    2. Ravi Kanbur & Xiaobo Zhang, 2005. "Fifty Years of Regional Inequality in China: a Journey Through Central Planning, Reform, and Openness," Review of Development Economics, Wiley Blackwell, vol. 9(1), pages 87-106, February.
    3. Higgins, Tim & Sinning, Mathias, 2013. "Modeling income dynamics for public policy design: An application to income contingent student loans," Economics of Education Review, Elsevier, vol. 37(C), pages 273-285.
    4. Barr, Nicholas & Chapman, Bruce & Dearden, Lorraine & Dynarski, Susan, 2019. "The US college loans system: Lessons from Australia and England," Economics of Education Review, Elsevier, vol. 71(C), pages 32-48.
    5. Chapman, Bruce & Doris, Aedín, 2019. "Modelling higher education financing reform for Ireland," Economics of Education Review, Elsevier, vol. 71(C), pages 109-119.
    6. Sergio Firpo & Nicole M. Fortin & Thomas Lemieux, 2009. "Unconditional Quantile Regressions," Econometrica, Econometric Society, vol. 77(3), pages 953-973, May.
    7. Bruce Chapman & Timothy Higgins & Joseph E. Stiglitz (ed.), 2014. "Income Contingent Loans," International Economic Association Series, Palgrave Macmillan, number 978-1-137-41320-8, June.
    8. Zhang, Junsen & Zhao, Yaohui & Park, Albert & Song, Xiaoqing, 2005. "Economic returns to schooling in urban China, 1988 to 2001," Journal of Comparative Economics, Elsevier, vol. 33(4), pages 730-752, December.
    9. Bruce Chapman & Tim Higgins, 2013. "The Costs of Unpaid Higher Education Contribution Scheme Debts of Graduates Working Abroad," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 46(3), pages 286-299, September.
    10. Barr, Nicholas, 2012. "Economics of the Welfare State," OUP Catalogue, Oxford University Press, edition 5, number 9780199297818.
    11. Nicholas Barr & Bruce Chapman & Lorraine Dearden & Susan Dynarski, 2018. "Reflections on the US college loans system: Lessons from Australia and England," CAMA Working Papers 2018-29, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    12. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66(4), pages 281-281.
    13. Loyalka, Prashant & Song, Yingquan & Wei, Jianguo, 2012. "The distribution of financial aid in China: Is aid reaching poor students?," China Economic Review, Elsevier, vol. 23(4), pages 898-917.
    14. Linda Y. Yueh, 2004. "Wage Reforms in China During the 1990s," Asian Economic Journal, East Asian Economic Association, vol. 18(2), pages 149-164, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dearden, Lorraine & Nascimento, Paulo Meyer, 2019. "Modelling alternative student loan schemes for Brazil," Economics of Education Review, Elsevier, vol. 71(C), pages 83-94.
    2. Rakshith Bhandary & Sandeep S. Shenoy & Ankitha Shetty & Adithya D. Shetty, 2024. "Education loan repayment: a systematic literature review," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 29(4), pages 1365-1376, December.
    3. Su, Chi-Wei & Cai, Xu-Yu & Qin, Meng & Tao, Ran & Umar, Muhammad, 2021. "Can bank credit withstand falling house price in China?," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 257-267.
    4. Camilo Andrés Garzón-Correa & Atilio Bustos-González & Melisa López-Hernández & Eduardo Calderón & Oscar Cespedes, 2022. "Challenges and Difficulties in Implementing an Income-Contingent-Financing Model in Higher Education in Colombia," Sustainability, MDPI, vol. 14(13), pages 1-14, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Britton, Jack & van der Erve, Laura & Higgins, Tim, 2019. "Income contingent student loan design: Lessons from around the world," Economics of Education Review, Elsevier, vol. 71(C), pages 65-82.
    2. Chapman, Bruce & Doris, Aedín, 2019. "Modelling higher education financing reform for Ireland," Economics of Education Review, Elsevier, vol. 71(C), pages 109-119.
    3. Stefan Gravemeyer & Thomas Gries & Jinjun Xue, 2011. "Income Determination and Income Discrimination in Shenzhen," Urban Studies, Urban Studies Journal Limited, vol. 48(7), pages 1457-1475, May.
    4. Qiao Wen, 2022. "Trends in College–High School Wage Differentials in China: The Role of Cohort-Specific Labor Supply Shift," Sustainability, MDPI, vol. 14(24), pages 1-23, December.
    5. Alessio Tomelleri, 2021. "Temporary jobs and increasing inequality for recent cohorts in Italy," LABOUR, CEIS, vol. 35(4), pages 500-537, December.
    6. Stefan Gravemeyer & Thomas Gries & Jinjun Xue, 2008. "Discrimination, Income Determination and Inequality – The case of Shenzhen," Working Papers CIE 16, Paderborn University, CIE Center for International Economics.
    7. Dearden, Lorraine & Nascimento, Paulo Meyer, 2019. "Modelling alternative student loan schemes for Brazil," Economics of Education Review, Elsevier, vol. 71(C), pages 83-94.
    8. Dearden, Lorraine, 2019. "Evaluating and designing student loan systems: An overview of empirical approaches," Economics of Education Review, Elsevier, vol. 71(C), pages 49-64.
    9. Katie Meara & Francesco Pastore & Allan Webster, 2020. "The gender pay gap in the USA: a matching study," Journal of Population Economics, Springer;European Society for Population Economics, vol. 33(1), pages 271-305, January.
    10. Zhou, Yixiao & Tyers, Rod, 2019. "Automation and inequality in China," China Economic Review, Elsevier, vol. 58(C).
    11. Jean-Marc Fournier & Isabell Koske, 2012. "The determinants of earnings inequality: evidence from quantile regressions," OECD Journal: Economic Studies, OECD Publishing, vol. 2012(1), pages 7-36.
    12. Verdugo, Gregory, 2014. "The great compression of the French wage structure, 1969–2008," Labour Economics, Elsevier, vol. 28(C), pages 131-144.
    13. Majda Benzidia & Michel Lubrano, 2016. "A Bayesian Look at American Academic Wages: The Case of Michigan State University," AMSE Working Papers 1628, Aix-Marseille School of Economics, France.
    14. Garloff, Alfred & Roth, Duncan, 2016. "Regional age structure and young workers' wages," IAB-Discussion Paper 201606, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    15. Brant Abbott & Giovanni Gallipoli & Costas Meghir & Giovanni L. Violante, 2019. "Education Policy and Intergenerational Transfers in Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 127(6), pages 2569-2624.
    16. Hans‐Peter Y. Qvist & Anders Holm & Martin D. Munk, 2021. "Demand and Supply Effects and Returns to College Education: Evidence from a Natural Experiment with Engineers in Denmark," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(2), pages 676-704, April.
    17. Wang, Le, 2012. "Economic transition and college premium in urban China," China Economic Review, Elsevier, vol. 23(2), pages 238-252.
    18. Ying Chu Ng, 2006. "Gender Earnings Differentials and Regional Economic Development in Urban China, 1988-97," WIDER Working Paper Series RP2006-136, World Institute for Development Economic Research (UNU-WIDER).
    19. Shihui Ma, 2021. "Diverging College Premiums: A General Equilibrium Framework on China's College Expansion Policy," Annals of Economics and Finance, Society for AEF, vol. 22(2), pages 289-315, November.
    20. 岩﨑, 一郎 & Iwasaki, Ichiro & 馬, 欣欣 & Ma, Xin Xin, 2019. "現代中国における男女賃金格差: メタ分析による接近," Discussion Paper Series 689, Institute of Economic Research, Hitotsubashi University.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecoedu:v:71:y:2019:i:c:p:95-108. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/econedurev .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.