UNIVERSITY TUITION SUBSIDIES AND STUDENT LOANS: A QUANTITATIVE ANALYSIS

We use a calibrated macroeconomic model to examine the different effects of university tuition and student loan policies aimed at improving access to public higher education. Student loans that condition repayment on future income substantially improve access. The significant fiscal cost of such loans can be offset by reducing current tuition subsidies, without significantly impairing access. The impact of such policies on graduation rates is smaller than on enrolment rates and even the most effective measures leave a very large gap between rich and poor. None of these policies has a significant effect on the economy’s total output