It is well known that higher education financing involves uncertainty and risk in line with students’ future economic fortunes, and an unwillingness of banks to make loans due to the absence of collateral. According to the history, consequence of this market failure is associated with significant problems. however, against this backdrop, there is possible solution-Income contingent loans (ICL).
An ICL for higher education funding takes the procedure as follows: Borrowers, college students, are obtained the loan for tuition and/or income support, usually with the resources being provided by the public sector. The critical and defining characteristic of an ICL is the debt collected depends on the borrowers’ levels of in-come for the future, in other words, capacity to pay not time, defines the repayment obligation.
The current ICL has been carried out since the first semester of 2010, with the National Assembly passing the related four bills on the 18th of January, 2010. The Ministry of Education, Science and Technology (MEST) has estimated 69 trillion won over the next thirty years for the government to cover the expenses of the ICL. There have been heated public debates over the six key issues, most of which are re-lated to the terms of the loan and qualification and requirement of the ICL appli-cants.
This paper is intended to describe and explain the background of such issues, and then provide the estimated results of the additional government expenses and amount of bonds at the moment of each issue to be reflected in the baseline estimate released by the MEST. The estimated results demonstrate that additional govern-ment expenses accrue to all the issues, although each estimate shows different long-term trend. It may, thus, be necessary to consider the different long-term trend of the government expenses of each issue when ICL-related bills was proposed.
An ICL for higher education funding takes the procedure as follows: Borrowers, college students, are obtained the loan for tuition and/or income support, usually with the resources being provided by the public sector. The critical and defining characteristic of an ICL is the debt collected depends on the borrowers’ levels of in-come for the future, in other words, capacity to pay not time, defines the repayment obligation.
The current ICL has been carried out since the first semester of 2010, with the National Assembly passing the related four bills on the 18th of January, 2010. The Ministry of Education, Science and Technology (MEST) has estimated 69 trillion won over the next thirty years for the government to cover the expenses of the ICL. There have been heated public debates over the six key issues, most of which are re-lated to the terms of the loan and qualification and requirement of the ICL appli-cants.
This paper is intended to describe and explain the background of such issues, and then provide the estimated results of the additional government expenses and amount of bonds at the moment of each issue to be reflected in the baseline estimate released by the MEST. The estimated results demonstrate that additional govern-ment expenses accrue to all the issues, although each estimate shows different long-term trend. It may, thus, be necessary to consider the different long-term trend of the government expenses of each issue when ICL-related bills was proposed.