Human Capital Policy
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Human Capital Policy

Reducing Inequality, Boosting Mobility and Productivity

Edited by David Neumark, Yong-seong Kim and Sang-Hyop Lee

This timely book evaluates international human capital policies, offering a comparative perspective on global efforts to generate new ideas and novel ways of thinking about human capital. Examining educational reforms, quality of education and links between education and socio-economic environments, chapters contrast Western experiences and perspectives with those of industrializing economies in Asia, focusing particularly on Korea and the USA.
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Chapter 5: Korea’s college loan program

Sungmin Han

Abstract

The aim of this study is to improve a college loan program in Korea by investigating an impact of the program. It considers a simple theoretical model to compare each level of human capital investment among various financial aid programs. It estimates the effect of the program on students’ academic achievements and the characteristics of defaulters. Empirical results suggest that the recipients of the government’s Income Contingent Loan (ICL)program show better academic performance than recipients of the General Student Loan (GSL) program. With regard to default, the probability of delinquency of students who receive a loan for living expenses and tuition becomes higher than that of students who receive a loan for tuition. These findings suggest that the ICL program is more effective in reducing the student’s financial burden, and the repayment system should be improved. Nonetheless, a rapid change of the GSL to the ICL may cause a financial burden to the government budget. Thus, a gradual change of student loan policy is required.

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