Student preferences over fees, grants and loans
|Day:||Wed 3 Jul|
Income Contingent Loans are offered in several countries as a way to provide financial aid to students who would otherwise not be able to borrow to meet tuition fees (because of lack of collateral) and shift the costs of university education away from taxpayers. ICLs provide two major advantages over typical mortgage-style arrangements: default protection and consumption smoothing. However, the design of such schemes can be extremely varied and complex, and depending on what aspects are emphasised they might have different implications for students and taxpayers alike. We survey a sample of UK undergraduates to test their understanding of the current system of Higher Education funding in England, and elicit their preference over a set of hypothetical changes to some of its components. We show that students have a good knowledge of some features of the system, but understanding of the way in which interest rates operate is poor. We also show that students attribute a different value to some features of the scheme. Specifically, they value highly the fact that all courses (STEM vs. non-STEM) are charged at the same rate irrespective of their running costs, and though debt averse would rather delay the repayments than pay off their debt as quickly as possible. We further investigate heterogeneity by individual characteristics (gender and SES) as well as expected labour market outcomes.