Refinancing Europe’s Higher Education through Deferredand Income-Contingent Fees: An empirical assessmentusing Belgian, German and UK data

The arguments for refinancing the European Union’s (EU) higher education via highertuition fees largely rest on preserving the profitability of the educational investmentand offering deferred and income-contingent payments. Using income survey datasetson Belgium, Germany and the United Kingdom (UK) we first estimate how graduates’private return on educational investment is likely to be affected by higher privatecontributions. We then evaluate the effect of income-contingent and deferred paymentmechanisms on lifetime net income and its capacity to account for graduates’ abilityto pay, considering numerous ways of financing the cost of introducing incomecontingency.Our analysis reveals that increasing individuals’ contributions to highereducation costs, through income-contingent and deferred instruments, does notsignificantly affect the private rate of return of heterogeneous graduates, allows forpayments to be indexed to ability to pay, and can be implemented in ways thatminimize the risk of adverse selection. These findings prove robust to significantvariations between countries’ unharmonised higher education institutional structures.[...]