State Higher Education Funding Models, Budgetary Allocation, Loan Recovery and Sustainability of Students’’ Loans Scheme

Abstract

Purpose - The objective of this study was to review existing empirical and theoretical literature on the effect of higher education funding models, budgetary allocation, loan recovery and sustainability of students’ loans schemes. Methodology - This is a critical review of theoretical and empirical literature on the effect of higher education funding models, budgetary allocation, loan recovery and sustainability of students’ loans schemes. Findings – From the existing literature on higher education funding, most studies associate higher education funding to government support in order to meet the skills gap in their respective economies. The studies also indicate that as government budgets continue to be overburdened by other emerging issues sustainable government support in higher education is a reality dawning in most economies especially the developing ones. In this light governments are incorporating other stakeholders to give their support in higher education and that this is believed to increase at a rate higher than that for government support to finally have sustainable higher education by the establishment of a self-sufficiency mechanism. Further literature reveals that most governments are managing higher education funding through the establishment of Students’ Loans Schemes in their quest for a self-sufficiency higher education funding mechanism. Moreover the studies reviewed are anchored on either Agency Theory, Stakeholder Theory, Financial Intermediation Theory or Resource Based Theory. The financial sustainability of students’ loans schemes is considered paramount for such countries to achieve their optimal levels of higher education funding. Most of the past studies give mixed results with some linking the funding models to the sustainability of students’ loans schemes, while others view loan recovery as a key component. Other studies still view that the sustainability of students’ loans schemes is a function of budgetary allocation from the exchequer from such countries. There is a dearth of studies examining the effect of higher education funding models, budgetary allocation, loan recovery and sustainability of students’ loans schemes. Implications: This review of literature mainly consists of countries from both developed and developing market economies with much skewness to African countries which not be a true representative of all the developed countries in the world. Developed economies have totally different priorities with superior models for financing higher education. Therefore, although developing economies stand to benefit more from the sustainable students’ loans schemes models, these economies are at different levels of development in various aspects including the legal framework and national priorities. Therefore, the findings of this study may vary in the developing economies even outside the African continent. Value: This study has presented a new dimension that may explain the inconsistent findings from prior studies and contribute to the discussion of the effect of higher education funding models, budgetary allocation, loan recovery and sustainability of students’ loans schemes. The relationship between higher education funding models and sustainability of students’ loans schemes may be moderated by loan recovery and mediated by budgetary allocation