Some other national schemes offer loans for study abroad as well as for those studying in national higher education institutions, but a number of issues limit the use of student loans to finance study abroad
- sound financial management, including appropriate interest rates to maintain the capital value of the loan fund and cover administrative costs;
- a sound legal framework to ensure that loan recovery is legally enforceable;
- effective machinery for targeting financial support and selecting recipients of subsidies on grounds of financial need or manpower priorities;
- effective machinery for loan recovery, to minimize default;
- publicity campaigns to ensure widespread understanding and acceptance of the principles of student loans and the importance of the obligation to repay.
These broad conclusions on feasibility and scope for use of student loans in developing countries were echoed in a 1995 comparative study for the World Bank by Adrian Ziderman and Douglas Albrecht, who concluded that: “student loans have received much attention both in the literature and in practice. While they have not always worked well … suitably reformed, they can constitute a productive, though limited mechanism for cost recovery” (p. 371).
International Issues
The first student loan schemes were mainly concerned with enhancing higher education participation in a domestic context, but implications for international student mobility were quickly recognized. An important feature of student loan schemes is that they provide financial assistance and subsidies to individual students, rather than to institutions. The first student loan program in Latin America, ICETEX in Colombia, was initially set up to provide financial assistance for students intending to study abroad. Continue reading “In principle, loans should be portable from one institution to another, and even across national boundaries”