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Could student loans be efficient
submited on 29.10.2008 in category Political stability | Fiscal affairs | Monetary policy | Regulated markets | Privatisation | Macroeconomic developments
submited on 29.10.2008 in category Political stability | Fiscal affairs | Monetary policy | Regulated markets | Privatisation | Macroeconomic developments
From banks’ perspective the providing of state guarantees on credit, granted to students, would limit to a large extent two of the significant problems, which the market practice is facing with this credit segment. Students are borrowers, who are typically associated with high degree of risk – mainly due to the more difficult assessment of their future perspectives on the labor market and their future income inflows, as well as their higher mobility (related to the real opportunity for them to emigrate more often in comparison with other categories of borrowers). In line with this students are often not in the position to provide adequate collateral.
The granting of student loans under lighter terms, as most supported by the government mechanisms for preferential treatment of particular clients, could actually engage considerable taxpayers’ resource.
From the perspective of public finance, the maintenance of a well established student loans’ program is considerably cheaper alternative than the unconditional financial support of the university education.
The establishing of such programs is to a larger extent based on the understanding, that the higher education is not a pure form of public benefit. In this line of thoughts, the applying of student loans’ schemes could be viewed as one of the efficient and relatively justified financing mechanisms. The justice to a large extent is insured also by the fact that after all the individual itself, rather than the taxpayers, bears some of the costs for receiving educational service, which improves its capacity to generate higher income in the future.
In order for these effects to be achieved, the practical application of the state supported student loans’ program could serve be partial substitution, and not just addition, to the existing state subsidies for the higher education.
The granting of student loans under lighter terms, as most supported by the government mechanisms for preferential treatment of particular clients, could actually engage considerable taxpayers’ resource.
From the perspective of public finance, the maintenance of a well established student loans’ program is considerably cheaper alternative than the unconditional financial support of the university education.
The establishing of such programs is to a larger extent based on the understanding, that the higher education is not a pure form of public benefit. In this line of thoughts, the applying of student loans’ schemes could be viewed as one of the efficient and relatively justified financing mechanisms. The justice to a large extent is insured also by the fact that after all the individual itself, rather than the taxpayers, bears some of the costs for receiving educational service, which improves its capacity to generate higher income in the future.
In order for these effects to be achieved, the practical application of the state supported student loans’ program could serve be partial substitution, and not just addition, to the existing state subsidies for the higher education.
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