World Bank Experience with Student Loan Programs
Until the mid-1990s, World Bank experience in the area of student loans had been very limited because student loans usually go hand in hand with the existence of cost-sharing arrangements. In many developing countries, national authorities had been generally reluctant to start charging tuition fees or to transform their generous scholarship programs into student loans.
In Kenya, for example, a recent World Bank-financed project in support of higher education failed to bring about significant change in the existing student loan scheme because the students successfully fought attempts to raise tuition fees.
In Argentina, where a World Bank loan is currently supporting a reform of the public budget allocation process for higher education, there is no talk of a student loan scheme because the subject of tuition fees remains taboo, even though, in practice, all public universities charge hefty fees for postgraduate education.
However, in recent years, the Bank has been able to make some inroads in the field of student loans, starting in 1992 with the preparation of a project to assist in the conversion of the Venezuelan Scholarship Foundation, FUNDAYACUCHO, into a student loan institution.
In the past three years, the number of World Bank student loan projects and activities has soared rapidly, as reflected in the table below. World Bank support is usually sought to achieve any one of three objectives.
In some instances, the main purpose is to establish a student loan scheme from scratch, as has been the case in Hungary, Bulgaria, Namibia, Ethiopia and Mexico (SOFES). In other cases, the intervention aims at improving the performance of an existing scheme (Venezuela, Jamaica, Brazil, China) or expanding coverage (Mexico / ICEES).
The rest of this section presents a review of the principal challenges encountered in the course of developing or strengthening student loan schemes, some suggestions on successful strategies to address these challenges, and observations on some unanticipated benefits of student loan programs.
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