CALCULATION OF THE RISK PREMIUM IN A SELF-SUSTAINING, INCOME-CONTINGENT STUDENT LOAN SYSTEM

摘要

In order to maintain the financial stability of the zero-profit student loan system continuous control and periodical intervention is inevitable. In this article we focus on the problem of the calculation of the risk premium, which assure the self-sustaining operation, when the repayment rate is given. We introduce a so called "top-down" simulation technique to create individual income paths which is quite simple to use and fits well the available cross-sectional database. We conclude that in a society where individuals income relative to others can easily change in time the risk premium of the student loans can be much lower.