Funding Higher Education in Australia: Is it Time to Look at Income Share Agreement as an Alternative Model to Income Contingent Loans?
Keywords:
HECS; Human Capital; Funding; Higher Education; ISA; “Income share agreements”Abstract
Human Capital Contracts are an emerging alternative means
for financing the up-front investment cost of university students. This
method involves investors financing the development of a students’
human capital based on their expected future incomes and taking as
share of their future income for a defined period as a return on their
investment. In recent years such an approach has begun to emerge in the
United States in particular. In Australia student fees are funded through
an income contingent loan system however this system is struggling
with high debt levels and high proportional write offs. Would an
Income Share Agreement (ISA) program possibility be an alternative
scheme which may take pressure of the Australian Government funding
by transferring the risk to the private sector? Ideally such a scheme
would maintain the basic principles behind the current system, but
allow for private investors to predominantly fund the scheme.
Potentially principles from both financing systems may provide a
framework for a new innovative model into the future. This review
suggest that further research appears to be warranted as this alternative
scheme has potential to address some of the key Higher Education
funding concerns in Australia at this time.
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