Post on 13-Dec-2015
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Student Loan Schemes: Lessons from
International ExperienceHDNED
World Bank
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Forms of Student Aid
Scholarships
Vouchers
Tax Credits
Matching Savings Grants
Student Loans
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Outline of the Presentation
The Student Loan Landscape
The WB Experience in Support of Student Loan Schemes
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Types of Financial Schemes
Mortgage LoansFixed PaymentsGraduated Payments
Graduate Tax (income-contingent)
Tax System (Sweden / Australia)Social Security (Ghana)
Tuition Postponement Option (Yale U.)
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Funding Sources
Government Graduates &Families
Industry &Services
Alumni &Philanthropists
InternationalCooperation
BudgetaryContributions
X
DedicatedResources Lottery proceeds Gambling tax Payroll tax Banking tax
XX
XX
XX
Trust Funds X X X X
Repayments X X
Investment Income X
Loans X X X
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Organizational Structure of Student
Loan Schemes
Type ofOrganizational Setup
Example
Department withinUniversity
USA, Mexico, China
Specialized Agency ICETEX (Colombia)Universities with Agency SOFES (Mexico)Commercial Bank Many CountriesAgency with CommercialBank
FUNDAYACUCHO(Venezuela)
SLB (Jamaica)Government with Agency USAGovernment withCommercial Banks
Canada, Poland,Hungary
Multilateral Agency withCommercial Bank
EBRD/ABN
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World Bank support to student loan schemes
Country Bank Activity Institutional Setup Venezuela
(1991-1999) Loan Government Agency with
Commercial Bank
Kenya (1995-2001) Study of SL reform
Government Agency
Jamaica (1996-2002)
Loan Government Agency with Commercial Banks
Namibia (1996) Study Government and Social Security Commission
Hungary (1998-2002)
Loan Government Agency with Commercial Banks
China (1998-) IDF Grant University-based
Mexico(1998-) Loan Association of Private Universities & Provincial
Public Agency
Malaysia (1998) Technical Advice Government Agency
Poland (1999) Technical Advice Government with Commercial Banks
Ethiopia (1999-) Study Graduate Tax (under study)
Bulgaria (2001-) Technical Advice Government Agency
Colombia (2003-) Loan Government Agency
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Reasons for Seeking WB Support
establishment of a new scheme
reform to improve an existing scheme
expansion of coverage
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Difficulties Encountered
Demand
Coverage
Financial Viability
Targeting
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Demand Factors
KnowledgeAwarenessUnderstanding
AttractivenessCultureCredibility
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Funding Issues
Public Sources
Privates Funds
Financial Sustainability
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Financial Viability
Interest Rate Subsidy
Default RateRepayment ScheduleIncomeCollection Mechanisms
Exemptions
Administrative Costs
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Real Interest Rates
-23.0%
-14.9%
-6.9%
-6.3%
-5.6%
1.0%
1.0%
1.6%
3.0%
3.0%
3.8%
4.1%
5.2%
5.6%
-0.6%
-2.3%
-1.4%
-25% -20% -15% -10% -5% 0% 5% 10%
Venezuela
Brazil
Kenya
Hong Kong
Jamaica
Indonesia
Japan
Finland
Australia
Chile
Sweden
Denmark
Honduras
Colombia
United States
Barbados
Province of Québec, Canada
Norway
0.0%
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Loan Recovery(Proportion of Present Value of Loan)
Country Without default andadministrative costs
With default andadministrative costs
Mortgage LoansVenezuela 77 8Kenya 30 8Chile 52 18Honduras 49 27Indonesia 43 29Brazil 38 29Jamaica 44 30Denmark 48 38Japan 50 40United States 71 47Finland 65 48Norway 67 52Colombia 71 53Hong Kong 57 53Province of Quebec,Canada
69 63
Barbados 87 67Income-Contingent LoansAustralia 52 43Sweden 72 67
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Administrative Efficiency
Institution Number ofEmployees
Number ofLoans
Processed
Fundayacucho(Venezuela)
120 5,000
ICEES(Mexico)
30 12,000
CSLP(Colorado)
125 90,000
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Targeting Factors
Leaking
Guarantees
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Success Factors:Design Dimensions
Good Information and Marketing System
Transparent Eligibility Criteria and Selection Processes
Adequate Repayment Features
Solid Financial Projections & Scenarios
Appropriate Follow Up Mechanisms
Proper Legal Framework
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Questions on the Polish Student Loan Scheme
participation of the commercial banksaccess for poor students (guarantors)cost of interest rate subsidyprovision for default exemptionsfixed paymentsfinancial projections (viability)
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Success Factors:Operational Dimensions
Efficient Institutional Management
Appropriate Financial Management
Efficient Loan Recovery
Stable Leadership
Ability to React Rapidly to Problems
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Performance Indicators
•Demand and Targeting Indicators
•Financial Indicators•Institutional Operation Indicators
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Demand and Targeting Indicators
Evolution of higher education enrollment rateProportion of beneficiaries from low and medium income familiesGender distribution of students and beneficiariesGeographical distribution of students and beneficiariesDistribution of students and beneficiaries by academic programCoverage (number of beneficiaries over student population)Academic results of beneficiaries (compared to general student population)
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Financial Indicators
Arrears & default rates (by socioeconomic group, gender, tertiary institution, academic discipline, and amount of loan)Interest rate subsidy levelLoan recovery ratioAdministrative costs compared to overall portfolio (and distribution of main expense categories)Cash flow projectionsEvolution of real value of assetsDistribution of funding sourcesDependency on government resourcesMobilization of non-government resourceReturn on investment
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Institutional Operations Indicators
Management indicators (measuring the efficiency and quality of internal processes)Satisfaction of beneficiariesTurnover of personnelIndicators of promotion of the student loan program (awareness of the program and understanding of the terms and obligations)