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PB2013-04: Essentials for Designing a Tertiary Education Student Loan Scheme in the Philippines

A student loan scheme plausibly addresses the challenge of broadening access to higher education. Of paramount concern, however, is how to design such a system that would ensure accessibility and program sustainability. Hence, a reform measure — the Unified Student Financial Assistance System for Higher and Technical Education (UniFAST) — is currently under deliberation in the 16th Congress with a Nationwide Student Loan Program (NSLP) as a specific mode of student financial assistance. This paper evaluates the proposed NSLP according to emerging standards in international practice. It recommends Income-Contingent Loan (ICL) scheme as a possible way to minimize default considering the fact that a person’s capacity to repay his debt would depend on his actual earnings. Preconditions for success of ICLs are discussed and a benchmark ratio for a reasonable repayment burden has been proposed based on the framework endorsed by Baum and Schwartz (2005). The paper hopes to contribute to discussions on designing a better nationwide student loan program in the Philippines.

Congressional Policy and Budget Research Department
Authors Keywords
Cornelio, Glenndale J.; debt management; student loan; higher education finance; income-contingent loan; student debt benchmark; debt burden; loan repayment to income ratio; student loan program design; UniFAST; Study Now Pay Later Plan; Glenndale Cornelio; CPBRD Polcy Brief;
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Published in 2013 and available in the Congressional Policy and Budget Research Department or Downloaded 362 times since October 01, 2015
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