Abstract by Paulo Meyer Nascimento, Research officer at the Institute for Applied Economic Research (IPEA); PhD candidate at the Department of Economics, Federal University of Bahia (UFBA) and Visiting student researcher at the Lemann Center (Spring 2017):
Contemporary debate on postsecondary student funding involves two key issues: a) fiscally responsible ways to allocate more resources to public institutions, as by increasing student participation on the costs of their studies in a manner that avoids additional barriers to access; b) design of student credit programs emphasizing equity goals, while limiting the size of public subsidies. These are issues of special interest as general and on-going crisis in the funding of universities takes place around the globe. In this seminar, we will discuss economic aspects of the “free college” discourse and present income-contingent designs as an alternative for a fully-subsidized higher education system as well as for Time Based Repayment Loans (TBRL - the most usual type of student loan in operation in the US and abroad). Such an alternative guarantees free access during the study period, insures against default and repayment difficulties after graduation, and takes advantage of the transaction efficiencies associated with government monopoly on income tax and pension contribution collections. Main features of income-contingent designs in operation in Australia and England will be assessed and eventually discussed for the US context, but the focus will be on this policy instrument as an alternative for a broad reform on higher education student financing in Brazil. This includes rethinking the tuition-free and selective current arrangement sustaining a stunted public sector as well as redesigning the Fundo de Financiamento Estudantil (FIES), the large Brazilian TBRL program for low-income students enrolled in private tertiary institutions (and which has been generating similar student debt problems to those observed in the US).
Keywords: educational finance; free college; student loans; Time Based Repayment Loans (TBRL); income-based repayment plans; Brazil.