Some other national schemes offer loans for study abroad as well as for those studying in national higher education institutions, but a number of issues limit the use of student loans to finance study abroad
- sound financial management, including appropriate interest rates to maintain the capital value of the loan fund and cover administrative costs;
- a sound legal framework to ensure that loan recovery is legally enforceable;
- effective machinery for targeting financial support and selecting recipients of subsidies on grounds of financial need or manpower priorities;
- effective machinery for loan recovery, to minimize default;
- publicity campaigns to ensure widespread understanding and acceptance of the principles of student loans and the importance of the obligation to repay.
These broad conclusions online payday HI on feasibility and scope for use of student loans in developing countries were echoed in a 1995 comparative study for the World Bank by Adrian Ziderman and Douglas Albrecht, who concluded that: “student loans have received much attention both in the literature and in practice. While they have not always worked well … suitably reformed, they can constitute a productive, though limited mechanism for cost recovery” (p. 371).
The first student loan schemes were mainly concerned with enhancing higher education participation in a domestic context, but implications for international student mobility were quickly recognized. An important feature of student loan schemes is that they provide financial assistance and subsidies to individual students, rather than to institutions. The first student loan program in Latin America, ICETEX in Colombia, was initially set up to provide financial assistance for students intending to study abroad. This remains one of the main purposes of ICETEX, although growing cost differentials between higher education in Colombia and in the United States or other developed countries mean that it now provides loans for many more students who study in Colombia than for students studying abroad. These include the cost differentials already mentioned, and the difficulties of enforcing loan repayments if graduates choose to work abroad after completing their studies.
Programs designed to increase student mobility, such as the Erasmus and Tempus programs set up to promote student exchange and mobility in the European Union (EU), are mainly concerned with facilitating student mobility between member countries (for example by harmonizing entry requirements for study programs in different countries and establishing credit transfer arrangements) rather than with setting up a system of financial support transportable across national boundaries. Students’ own governments are generally expected to finance the costs of study abroadwhether by grants, student loans, or other meansbut the need for greater harmonization of rules determining levels of tuition fees and student support in different countries is increasingly emphasized, as student mobility and opportunities for study abroad increase.
Another important issue now recognized in several countries, as skilled labor becomes increasingly mobile, is the need to design mechanisms for collecting loan repayments from graduates working abroad. Implications for student loans of what is variously described as international labor mobility or “brain drain” have received limited attention, although potential losses from graduates who choose to work abroad and then default on loan repayments have been emphasized by critics of student loans. Barr argues that income-contingent loans could be collected by the tax authorities in any country where a graduate subsequently works, and the revenue transferred to the country that originally provided a student loan: “With such an arrangement loan repayments are transparent with respect to international boundaries” (2001, p. 234). Barr further proposes that that “it would be possible for the EU or the World Bank to establish an International Learning Bank from which students in poor countries would borrow to finance their tertiary educationboth those who subsequently stay at home and those who emigrate” (2001, p. 234). Such possibilities, and their implications for the finance of higher education and for labor mobility, remain to be explored.