Estimating taxpayer subsidies and individual repayment burdens of a student loan program in Spain

We study the program Prestamos Renta Universidad that provided loans to Master’s students in Spain between 2007 and 2010. We estimate predicted income functions and calculate individual repayment burdens and government cost using unconditional quantile regression analysis. We exploit the changing conditions of the successive calls to illustrate three important lessons for the design of student loan schemes: fixed monthly repayments exert an excessive burden to graduates at the lower end of the in¬come distribution; general interest rate subsidies are costly to the taxpayer and unfairly distributed; while the deferment of payments due in case of hardship protects low earners, general grace periods are costly and inequitable.