Income-linked education finance tests alternative to student debt in Southeast Asia

A Singapore-based education-financing programme is testing whether income-linked funding can widen access to higher education without creating unmanageable debt. Global Financing for Education’s Pay It Forward scheme gives students funding in exchange for 3 to 10 per cent of their later income for between one and 10 years. Repayments are generally capped at twice the original amount financed.

The model shifts some risk from students to the financing pool when graduates earn little or cannot find work. GFE founder Mario Ferro said the scheme had disbursed about US$25,000 to 11 students since May, while requests had exceeded US$3 million. Ferro said GFE considers financial need, field of study, institution and likely employment outcomes.

One student received US$5,000 for graduate study in Singapore and agreed to contribute 10 per cent of income for three years. Australian economist Bruce Chapman said governments could pool earnings risk more broadly through tax and payroll systems. Private providers, he said, had an incentive to select students likely to produce financial returns, potentially excluding lower-paid professions.

Economist Elza Elmira said the approach could help Indonesia’s “missing middle”: households too wealthy for the KIP Kuliah support programme but unable to cover tuition and living costs. She warned, however, that private finance might favour top universities and high-earning fields. Elmira proposed government guarantees, accredited-programme requirements, priority support for lower-return fields, income thresholds and automatic pauses during unemployment.

She also suggested limits on repayment shares and cancellation after defined events. Malaysian economist Geoffrey Williams said the scheme resembled a privately administered graduate tax but was too small to replace national systems such as Malaysia’s PTPTN, which supports about 600,000 continuing and new students.