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Student loan as an instrument for students’ funding

Student loan as an instrument for students’ funding. Seminar 9 Ilya Prakhov Research fellow, Centre for Institutional Studies. Higher School of Economics , Moscow , 201 2 www.hse.ru. The Problem. Dual-track system of higher education in Russia.

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Student loan as an instrument for students’ funding

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  1. Student loan as an instrument for students’ funding Seminar 9 IlyaPrakhov Research fellow, Centre for Institutional Studies Higher School of Economics , Moscow, 2012 www.hse.ru

  2. The Problem • Dual-track system of higher education in Russia. • High proportion of students who study on a tuition-paid basis. • Need for alternative mechanisms of funding. • Agents who are interested in this issue: the state, charity funds, banking sector, employers, students and their parents. photo photo photo Higher School of Economics , Moscow, 2012

  3. Outline • Aim: to analyze the practice of Western countries in realization of schemes of student funding, to make conclusions about current situation on Russian market of student loans. • Questions: • What sources of student funding exist and can be implemented? • What is the role of student loan as a funding instrument? • What programs of student lending exist? • What problems and concerns take place due to asymmetric information? • Why student loans are not widespread in Russia? What can be done? photo photo photo Higher School of Economics , Moscow, 2012

  4. Sources and types of higher education funding photo photo photo Higher School of Economics , Moscow, 2012

  5. Models of funding higher education • State funding (Germany, Sweden, France) • Private funding (the US, the UK) • Russia: transition from the state funding model to the private one, when parents cover the costs of education photo photo photo Higher School of Economics , Moscow, 2012

  6. Student loan: definition • Student loan is a type of financial aid to students who are not able to cover tuition at university. • The existence of student loans can result in: • enhanced institutional quality, • additional capacity, • additional participation and accessibility, • more higher educational choices for students, • better style of student living (Johnstone, 2005). photo photo photo Higher School of Economics , Moscow, 2012

  7. The role of the government in student borrowing • In state lending programs: increase of accessibility, efficiency and quality of higher education. • In private lending programs: laws, bearing the risks of defaults, subsidizing, diminishing of transaction and administrative costs of lending. photo photo photo Higher School of Economics , Moscow, 2012

  8. Forms of student loans • Conventional mortgage-type loan • (-) increased risks for students and their parents • Income contingent loan • (+) more preferred system • (+) administrative costs are lower • (+) ‘insurance from poverty’ • (-) situation in Russia: ‘salary in envelopes’ photo photo photo Higher School of Economics , Moscow, 2012

  9. Elements of student loans (Johnstone, 2005) • Laws • Eligibility • Source of capital • Origination and lender • Ultimate risk • Loan amounts and limits • Amount and formof subsidization • The shape and duration of the repayment period photo photo photo Higher School of Economics , Moscow, 2012

  10. Student loans in international perspective • Australia: HECS • Germany: Bafög • Sweden • The UK • The US photo photo photo Higher School of Economics , Moscow, 2012

  11. Presentation • Dynarski A. Who Defaults on Student Loans? Findings from the National Postsecondary Student Aid Study • Student loans for low-income groups? But they are more likely to default. What should be done in this case? photo photo photo Higher School of Economics , Moscow, 2012

  12. Role-play game ‘Designing a student loan for Russian students’ • Evidence: only 4% of students used the loan. • Potentially, more than 35% of parents are ready to take a student loan. • Why don’t they do so? • Unfavorable conditions of lending? • The choice towards cheaper education? photo photo photo Higher School of Economics , Moscow, 2012

  13. Three groups of agents • The government: develops a policy that will encourage (1) taking a loan by households, (2) providing a loan by banks. • Banking sector: makes an offer to the households and to the government. • Households: explain conditions of taking a loan. photo photo photo Higher School of Economics , Moscow, 2012

  14. 20, Myasnitskaya str., Moscow, Russia, 101000 Tel.: +7 (495) 628-8829, Fax: +7 (495) 628-7931 www.hse.ru

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