Author: National Association of Student Financial Aid Administrators (NASFAA)Publisher:
ISBN:
Category :
Languages : en
Pages : 13
Book Description
There is remarkable diversity in student loan systems throughout the world. In considering the ideal approach to system of loan repayment based on income here in the United States, it is valuable to examine the nature, successes, and failures of some other countries' methods of offering borrowers income-contingent student loan repayment. Two countries that seem to be particularly relevant to the efforts of this consortium are Australia and the Netherlands. While far from the only countries that use an income-contingent student loan repayment scheme, these two were selected for analysis because of the differences they illustrate: a "pure" system in the case of Australia and a "hybrid" system in the case of the Netherlands. This consortium's proposal for an auto-IBR system in "Automatic for the Borrower: How Repayment Based on Income Can Reduce Loan Defaults and Manage Risk" represents an ideological shift in the student loan system in the United States; a potentially complicated restructuring of the current system that would involve several government agencies. In striving for something simple, efficient and fair there is always a chance for unintended consequences; thus, there is value in looking to other countries to draw instruction from their experiences. In the two countries surveyed, there seems to be a delicate balance between uptake rate and overall cohort repayment rate. The Netherlands system suffers from a lack of participation, partially as a result of its opt-in nature, but the Australian system suffers from a substantial amount of debt that is unlikely to be repaid. Policymakers should consider this balance when they set objectives for an auto-IBR system and design the system to maximize participation while protecting against providing excessive loan forgiveness or opportunity for non-payment. [This paper accompanies "Automatic for the Borrower: How Repayment Based on Income Can Reduce Loan Defaults and Manage Risk" ED558514.].