Higher Education Financing Innovation Based On ICL In China

The ICL is a credit loan that the debtor repays the debt with a certain percentage of income in the future. It has been successfully widely used in student loans. The high eduction financing model with ICL can increase students’higher education cost-sharing under the premise of not increasing its family burden. This article will explore the higher education financing model based on ICL in China.Firstly, an empirical analysis about the total economic benefit, spillover effects and relative factor productivity of higher education investment is done in this paper using Feder model based on the regional difference to study the economic contribution status quo of China’s higher education investment and financing. The results show that economic benefits differ significantly among regions, presenting the highest economic benefits in the central region, the second in the east and the lowest in west; the spillover effect, the higher education delivering to non-higher educational sectors, is negatively correlated with the regional economic development degree. Specifically, the spillover effect in the west is the greatest, the central region and the east follow successively; The relative factor productivity of higher education is lower than that of non-higher education sector. Besides, the paper does a comparison among different regions on the overall level and constitute of China’s higher education funding, finding that the funding does not match with the spillover effects and the scale of inputs is limited. All of these present the structure of China’s higher education financing exist some problem, and is caught in a bottleneck.Considering the characteristic that the higher education financing innovation including ICL is superior to the traditional model, this article attempts to build an innovative financing model based on ICL for China’s higher education to break the financing bottleneck of China’s current higher education investment and financing system. Before building the model, the article analyzed the ICL details and the international practical experience of higher education financing innovation based on ICL. As the international practical experience shows, government financial security, improved the tax collection system, a good moral environment and high personal return rate of higher education play important roles in successful implementation of ICL-based higher education financing innovation. In addition, the international experience of failure reveals that management and legal prerequisites, correct implementation steps are also key factors influencing the success in implementation of the new innovative financing model.The scientific and operability of the ICL-based higher education financing innovation are necessary conditions for its success in building and implementation. In this paper, the theoretical arguments concerning theory of externalities, human capital risk investment theory and cost-sharing theory confirm the sufficient rationality and scientific of this financing innovation. Additionally, considering our preliminary conclusions of international practical experience, the paper analyzes the qualifications that China has owed about the implementation of ICL-based higher education financing innovation, indicating that China initially has those conditions.ICL is the key link to the ICL-based higher education financing innovation, determining its continued effective operation. To select one ICL type suitable for China’s national conditions from the four basic types of ICL, the paper makes theoretical and empirical analysis respectively. Theoretical analysis demonstrates that the risk-sharing ICL does better than other types in reducing adverse selection and moral hazard problems brought by the information asymmetry, educational equity, income redistribution and other issues. According to the empirical analysis and simulation calculation results, compared with our current "tuition+tax" financing mode, the risk-sharing ICL shares more higher education contribution of undergraduate and graduate students and better stability of personal higher education rate of return. Moreover, the empirical result presents HCC shares higher education contribution among graduate than other modes. Therefore, the theoretical and empirical analysis conclude that ICL mode combining risk-sharing ICL with fixed repayment proportion and HCC is the Pareto optimal choice of China’s higher education financing model.We will select the mixture mode of ICL with risk-sharing and HCC, build the basic operating framework of the innovative higher education financing model based on ICL that consist of higher education contribution scheme, ICL approval mechanism, ICL recovery mechanism. And propose institutional arrangements of higher education contribution scheme, ICL approval mechanism, ICL recovery mechanism.To seek the microscopic conditions for the continuous operation of the innovative higher education financing model based on ICL, the paper uses Dynamic Game Method to solve the Nash equilibrium of the Stakeholders’ Game in risk-sharing ICL and HCC under different microscopic conditions. According to the Game Analysis conclusions and basic operating framework, the paper puts forward several suggestions in support of the implementation of ICL-based higher education financing model in China. The first step is to build supporting measures aimed at ensuring the sustainable development of ICL-based higher education financing, which is done from four areas including the establishment of effective student information management system, building a long-term financial mechanism for ICL, guiding informal constraints for financing efficiency improvements, and the implementation of market-oriented independent school of higher education mechanisms. Secondly, ameliorate the operating environment of China’s ICL-based higher education financing model by improving the legal environment, the credit environment as well as the tax environment.