Student Loans: A Hungarian Proposal - Part 2: Implementation

November 1999

Student Loans - A Hungarian Proposal Part 2

The Hungarian government intends to introduce a system of student loans as part of a wider reform of higher education and this paper (the companion paper) discusses the implementation of this student loan strategy.

The core of the proposal is threefold:
- Student loans have income-contingent repayments, i.e. repayments calculated as 5-6% of a student’s subsequent earnings, collected alongside income tax; the scheme is to be administered by a Student Loans Agency.
- The loans attract an interest rate broadly equal to the government’s borrowing rate, i.e. there is no interest subsidy.
- Debt sales will be used to bring in an element of private funding.

This paper looks at issues of implementation, discussing in successive sections the design of the Student Loans Agency, debt sales and a range of other questions. Since many issues remain to be decided, the paper is, for the most part, couched in terms of questions which will need to be answered.

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Client: Republic of Hungary

Authors: Nicholas Barr & Iain Crawford

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