INCOME-CONTINGENT LOANS
Higher education for rich and poor — with little stress over funding it
Bank loans whose repayment depends on recipients’ earnings after graduation align different interests in society
In my recent testimony before the Commission of Inquiry into Higher Education and Training (aka the fees commission), I presented an approach that builds on the successful experience with income-contingent loans (ICLs) in Australia, New Zealand, Hungary, Ethiopia, South Korea and other countries, but with adaptations pertinent to the South African context. Time is quickly running out and we need to be as innovative as possible if we are to succeed at achieving good education as well as sustainable and equitable development for all, especially in times of low economic growth. Let’s start with the first question: what is an ICL? It is a loan that covers the costs of tuition for a degree, which in our country average between R200,000 and R250,000 for a four-to five-year study programme. Unlike an ordinary loan (a conventional mortgage, for instance), the ICL requires no upfront collateral and repayments are deferred until the student gets a job. So, it can be accessed by anybody (rich ...
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