Progressive income contingent loans (ICLs) for college students, where repayment rates increase with income, may provide additional insurance against income risks after graduation. We study how the progressiveness of ICLs affects life-cycle behaviors and welfare. We document stylized facts on education in Australia, where recent reforms made ICLs more progressive. We found correlations between reforms and enrollment rates. We estimate income dynamics and found that progressive ICLs provide more insurance in the first repaying years. Lastly, we build a heterogenous-agent life-cycle model and find that progressive ICLs induce higher education attainment and welfare than non-contingent loans or linear ICLs.

Dr Yue Hua is an economist whose research focuses on macroeconomics, labor, and development. Dr Hua received her PhD in Economics at the University of Minnesota in 2022 and her bachelor’s degree at the Chinese University of Hong Kong in 2016. She has also been a Research Fellow at the ARC Centre of Excellence in Population Ageing Research (CEPAR) since September, 2022.