Authors: Bruce Chapman and Peter Drysdale

Making a higher education financing system work that seeks to recoup a significant part of the investment in higher education from individual beneficiaries requires the fiscal infrastructure to collect debts, through lending agencies or the tax system. A big question then is whether a country has these capacities for implementing and administering a student loan or higher education financing scheme. Countries need strong political support which is long term, enough bureaucratic capacity to ensure an effective administration and widespread public acknowledgement of the need for a higher education system and private contribution to its financing.

In this month’s EABER Newsletter Peter Drysdale and I argue that country specificity is important in the design, implementation and ultimately, the effectiveness, of higher education financing schemes. If Thailand were to implement a scheme similar to that in Australia or New Zealand, for example, it would be unlikely to generate either the same outcomes or the same level of debt repayment unless there were a raft of complementary reforms in the fiscal or social security system. One of the reasons for this might be that local incomes are not high enough in Thailand to allow for sufficient rates of repayment. But another critical reason has to do with the capacity to collect.

In principle, income contingent loans for individual financing of higher education, repaid though the tax system when an appropriate income threshold is reached, are the preferred scheme for financing higher education. But in some countries the institutional framework might not be sufficiently robust to allow efficient, workable, collection of income contingent loans. If this is the case, a productive policy strategy might involve improvements in public sector management.

The Australian case offers some useful insights into the application of higher education financing in East Asia, although it would be wrong to suggest that income contingent loans schemes are a panacea for all the challenges to financing higher education funding. There are many difficulties in design as well as other problems beyond the design of income contingent loans schemes that need to be part of effective strategies for funding higher education in East Asia and elsewhere.