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

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  • 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.

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  • 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
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    3. 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.

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