(Entry by Andrés
Bernasconi)
PROPHE Summary:
On June 1st., 2005, Chile's President Ricardo Lagos signed into law
an Act of Congress creating a new financial aid system for higher education
students. In this new system, the repayment of educational loans taken
by students from private financial institutions will be guaranteed by
the student's higher education institution if the student drops out
before finishing her studies, or by the Government, if she finishes
studies but is not able, for any reason, to meet her repayment obligations.
In effect, then, higher education institutions and the Government will
stand as collaterals for students taking debt to finance their studies,
while financial institutions shall be barred from requesting any additional
guarantee from their student debtors.
For the full story (shown with permission), see the Chronicle of
Higher Education, June 24, 2005, "Chile to Create Loans for
Private U.'s," by Mike Ceaser. http://chronicle.com/temp/reprint.php?id=mg6yntvivmgbksgrzzh3bvbuszyo16ao
PROPHE Observation:
This is the first financial aid system to benefit students both
at public and private institutions, since in the early 1980s higher
education was opened to private providers, and public universities began
to charge tuition. It also covers students at both universities and
non-university tertiary education.
The new law was vocally opposed by student organizations in public
universities, which view the legal initiative as a first step in the
dismantling of the current system of heavily subsidized government loans,
of which students of public universities are the sole beneficiaries.
To assuage this opposition, the Ministry of Education vowed to maintain
and expand the government loans program, with the new system of private
loans as an additional source of funding for those who are not eligible
for public loans.
The new funding mechanisms comes not a bit too early as higher education
enrollments in Chile, already the largest in Latin America as a proportion
of the 18-24 age cohort (according to a recent World Bank report), continues
to increase as high school reaches universal coverage, and the government
is finding it increasingly difficult to provide an ever increasing number
of loans out of its budget. Shifting the burden of funding to the private
financial industry will make it possible, the government expects, for
enrollments to continue to grow in a higher education system which,
uniquely in Latin America and almost anywhere else, derives over 70%
of its funding from private sources.
