Introduction and Summary

Abstract

In 1989 the Australian government introduced the first university tuition-loan program in which debts would be collected through the income tax system depending on the participant’s income.¹ The policy, known as the Higher Education Contribution Scheme (HECS) is an arrangement known as an income contingent loan (ICL), a debt that differs critically from ‘normal’ loans in that repayments occur if and only when debtors’ incomes reach a given level. Eight other countries have since adopted similar student loan schemes and, at the time of writing, there is a Bill (the Earnings Contingent Education Loans (ExCEL) Act) under bi-partisan consideration in the US Congress which, if passed, would have the effect of introducing a broadly-based ICL. It is generally agreed that ICL policies for higher education financing have worked effectively from the perspective of equity and efficiency, and from a transactional perspective.