Higher Education Financing - Approaches to Student Loans from world bank

How do you raise access to higher education for everyone in Romania, including those from disadvantaged backgrounds, especially given Romania’s aspirations to accelerate growth and close the income gap with its EU neighbors?

This was the starting point that generated a series of discussions and materialized in two recent workshops about student loans as a way of addressing this important challenge. The workshops were jointly organized by the Ministry of Education, Research and Youth (MERY) and the World Bank. The World Bank is a development bank; and it is also a knowledge bank. It is in this latter role that the Bank contributed by sharing its international expertise and experience, and provide the requested technical assistance to the MERY, a counterpart having a clear vision of what needs to be done and seeking guidance on how to do it.

There are several reasons why broadening the access to higher education is becoming increasingly important in Romania. Romania wants to make the best use of its human resources to sustain rapid economic growth, and also ensure that everyone can contribute to and benefit from that growth. The number of active population who graduated from higher education has been increasing, but a significant gap between rural and urban areas persists –3.2% and 21.4%, respectively. Closing the gap in the number of graduates from higher education between those active in rural and urban areas will be important to sustain rapid and inclusive economic growth.
Closing this gap will involve a number of different instruments. The World Bank experience from other countries suggests that introducing a student loan and grant scheme can help in different ways: besides providing the means for poorer students to cover the cost of tuition, it also provides for opportunities to re-think how the state can finance higher education and how the cost of providing high quality education to as many students as possible is shared between the state and the students attending higher education institutions.
A World Bank team of experts with a large international experience in the area of student financial assistance set the stage in February 2008 by introducing representatives of the MERY, of the academia, students and other stakeholders to key principles and objectives of student loans, key aspects related to student loan design, and the implementation challenges faced in other Central and Eastern European countries (see Higher Education Finance & Student Loans Scheme Options for Romania - pdf file - presented by D. Bruce Johnstonewe and Pamela Marcucci on February 28, 2008). Specialists in Romania took a comprehensive look at the range of policies and design features for student financial support that could be considered. International experience indicates that, to be successful, student loan programs need to have from the start clear consensus on objectives and key design features.
In April 2008, the second workshop focused on the practical application of international experience with students loan programs to the Romania context, leading to a very interesting review of potential student loan objectives in Romania, and a lively debate on key aspects in student loan design that would have to be taken into account. (see Higher Education Finance & Student Loans Scheme Options for Romania - pdf file- presented on April 18, 2008). A group of 35 participants were actively involved in providing answers to essential questions on objectives of a student loan scheme in Romania, beneficiaries, costs, subsidization, repayment obligations. 85% of respondents to a questionnaire indicated that the objective of a student loan in Romania should be to support specific Government policies, such as getting more graduates from rural areas, getting more graduates in specific fields. (see the Questionnaire Results - pdf file) The World Bank will further support the MERY to prepare a white paper on student loans to be launched in a third broader event scheduled for end of May, 2008.