Conventional fixed-schedule loans, also understood as government-guaranteed loans, are available to higher education students in Taiwan on the basis of means-tested family incomes. The government provides the payment of interest on the debt before a student graduates and guarantees the repayment of the debt to the bank in the event of default. Borrowers begin repaying their loans one year after graduating from college, at a fixed monthly rate. The loan’s maturity depends on how many semesters of tuition it covered. Social tensions over increasing living costs and low salary for college graduates have caused heated disputes over higher education tuition fees and the terms of student loans, while the government’s financial burden to pay for the interests has also been increasing. Unlike the conventional fixed-schedule loans which have equal periodic payments, income-contingent loans are repaid as a proportion of annual income. Capacity to pay, and not time, defines the repayment obligation. This paper reviews the terms of the current student loan system in Taiwan, examines the income-contingent loan schemes implemented in countries such as Australia and England, and discusses implications of the income-continent loan schemes for the student loan system in Taiwan.
