Follow us
Publications Commentary Research People Events News Resources and Videos About IFS
Home Publications Modelling alternative student loan schemes for Brazil

Modelling alternative student loan schemes for Brazil

Lorraine Dearden and Paulo Meyer Nascimento
Journal article | Economics of Education Review

This paper simulates student loan schemes for Brazil. A copula approach is applied to simulate dynamic earnings paths for graduates. Repayment patterns are then simulated for time-based and income-contingent loan designs. The results show that the Brazilian time-based scheme involved unsustainable repayment burdens for many graduates and contributed to the scheme's high default rates. We also show that the new income-contingent scheme is also likely to involve high taxpayer subsidies. We consider alternative designs with different strengths and weaknesses but favour an income-contingent scheme with a loan fee, repayment rates at 50% of current income tax rates and an interest rate at the government's cost of borrowing upon graduation and above initial tax threshold. We conclude by emphasising that full involvement of the federal revenue system is more desirable than the present approach of employer withholding. This would increase the earnings base and reduce costs, which is important for Brazil's current precarious fiscal situation.

More on this topic

Newspaper article
'The power of the Treasury needs constant challenge and scrutiny, but in the end, it needs to play its role in challenging and scrutinising the rest of government. It needs to be unpopular.' Paul Johnson in The Times on the Treasury's role in last week's decisions on education spending.
In this observation we look at the arguments to consider when assessing the merits of the large injection of education spending.
Recent IFS work shows that students from disadvantaged backgrounds see some of the largest financial benefits from going on to university. But these students are also less likely to attend university than their better-off peers who get exactly the same grades as them. And, even among students with ...
Press release
The government has committed to spend about £4.3 billion on education in England in response to the pandemic over the two years 2020–21 and 2021–22. However, about £1.3 billion or 30% of this supposedly additional money is currently due to be funded from underspending or from existing ...