67732 February 2012 – Number 56 JORDAN STUDENT AID REFORM: OPPORTUNITIES FOR A NEW GENERATION Ghassan Alkhoja, Zaina Dawani, and Ehab Shanti 1 among university and higher education students and the potential demand among secondary Introduction: The Arab Spring underlined the students; (iv) the degree to which financial barriers importance of the youth/education/employment keep eligible students from continuing on to higher nexus. In many MENA countries, financial education or on to their institution of choice; and (v) considerations play an important role in the degree to which access to loans or other types of constraining educational opportunities for youth, educational finance would influence students’ especially for those with limited means. This is the decision to go on to higher education or to study in a case in Jordan and this Quick Note is based on a higher cost discipline. study2 to better inform decision-makers on policy options regarding the development and expansion How and Where: To answer the above questions, of student aid programs in Jordan. The focus was on ten focus groups were conducted in six geographical better understanding the views and attitudes of areas across Jordan, covering a total of 178 students, parents, and non-students towards student participants ranging from university students, loans generally, and specifically with regards to the secondary school students (last year), parents, proposed Jordan Student Aid Bank (JSAB) model. community college students, and recent secondary The goal was to give voice to primary stakeholders school graduates who did not continue on to post- and allow them to participate in the process, express secondary education; or those who started and their views and concerns and thus become active could not continue due to financial constraints. The partners in the programs rather than passive areas/institutions were identified with the purpose recipients to pre-determined activities. of diversification in mind. This in turn illustrated multiple realities and represented a wide range of Issues/Questions Addressed by the Study: The views/experiences related to the issues this research specific objectives of the study were to assess: (i) aimed to enquire about. how university undergraduate students finance their higher education and the extent to which they Main Findings: The findings of the study showed and their families take out existing (student or that if such a loan model existed, 70 percent of consumer) bank loans; (ii) how secondary students participants would apply for it. Below is a synthesis in their final year of study plan to finance their of their preferences: higher education; (iii) the demand for student loans Study Synthesis Grace Period The majority (60 percent to 70 percent) 1 Ghassan Alkhoja is a Senior Operations Officer with the Huiman said the grace period Development Department of the Middle East and North Africa should be 1 to 2 years Region of the World Bank (MNSHD) and TTL of the Jordan Higher Education Technical Assistance. Zaina Dawani and Ehab Restrictions on Hours of The loan should not Shanit are consultants in MNSHD. This Quick Note was cleared Study restrict the student to by Acting Education Sector Manager 2 set hours, study hours The Student Aid Focus Group study is undertaken as part of the Jordan Higher Education Technical Assistance project. will vary. Guarantor Almost 90 percent of additional 20 percent the participants of participants identified the suggested that having requirement for a loan the loan dispensed guarantor as a barrier through an "Islamic" and stated their bank would make any preference that the difference government should Percentage of Salary For the vast majority of guarantee the loan and participants, the that this requirement average percentage of should be dropped. If salary for repayment absolutely necessary, was 20-25 percent. certain exceptions Only a small minority should apply to suggested that the requirements made on percentage should be parents who are self- as low as 5 or 10 employed or to percent orphans, etc. Bank Dispensation The vast majority of Loan Amount The loan amount participants had no should vary according problem with the banks to discipline. The being the primary median number is 5,000 dispensers of the loans. JDs over 4 years for a In fact, most preferred BA and 2,000 JDs over the banks to dealing 2 years for a diploma with government Interest Absolutely no interest! offices to eliminate the For religious and perception of cultural reasons, more favoritism and because than 80 percent of all of the "convenience" in participants would not having bank branches take loans with interest. in the most remote If the government pays areas the interest, some 60 Use of the Loan There was near percent would apply unanimous consensus for the loan. Some amongst all focus suggested seeking a group participants that fatwa (a religious the loans should be interpretation) on what used to pay tuition ruling is if the fees as the number one government itself pays priority. The family or the interest. 40 percent work can cover any of the respondents who additional costs would apply for loans Loan Forgiveness Most participants expressed willingness suggested that loan to pay inflation, so long repayment should be as it is not interpreted tied to employment. as interest (i.e. Halal). Many suggested that Shariaa Compliant Loans General perception of there has to be a so-called "Islamic mechanism in place for loans" was equally loan forgiveness or negative, only an delayed repayment for the unemployed. February 2012 · Number 56 · 2 Links to Previous Studies: The findings of this was also shown that other profoundly personal qualitative research complement and affirm the aspects such as motivation, aspirations, and results of previous quantitative studies, individual prospects are highly affected by demonstrating that the demand for student aid in financial situations. Students indicated that if they Jordan is high. The demand will grow even higher knew early enough in high school that financial aid with the bulge of young students entering post- would be available, they would have made more secondary education in the coming few years. informed decisions and their prospects would have Financial constraints were cited as the primary been different, influencing their choice of stream- barrier facing students and their families when chosen at high school, their motivation to study and decisions on education are to be made, widening to achieve higher grades for admission as well as existing gaps and inequalities in the education their fields of study and subsequent career system. Almost 95 percent of focus group aspirations. participants suggested that costs of academic hours are biggest factor in choosing the discipline, thus Perceptions of the Existing Student Aid Program: influencing employment prospects (see table below The existing student aid program in Jordan seemed on affordability of higher education in Jordan. to have little visibility among focus group participants. Knowledge about the program was weak, and its conditions were seen as very difficult Affordability of Higher Education in Jordan to meet, particularly the guarantor requirement. In addition, the degree to which the financial needs of students and families are met through the program is low, with a corresponding low coverage rate. It was commonly agreed across all focus groups that there is a need for far-reaching financial aid for post-secondary education in Jordan. Therefore a re- thinking and re-designing of the current student aid model, its conditions, and its parameters is clearly needed. Cultural and Religious Aspects: While the findings of the study showed that the demand for the proposed indirect model (JSAB) would be high, cultural and religious aspects must be factored in. Most participants indicated their preference for an indirect model, proclaiming that banks will be more accessible and neutral as opposed to government institutions. Linking Student Aid and Employment Programs: One important aspect that needs to be highlighted is the establishment of close linkages between student aid and employment programs in Jordan. The reason behind aversion to loans among participants who were not in favor of student loans is the low Sources: Government of Jordan, Department of Statistics of employment opportunities in the labor market. Jordan, International Finance Corporation, Study for Student Policies that aim to integrate placement, Financing, July 2007. internships, volunteering, and other programs with education are crucial, and student aid programs While key education decisions such as to continue need to be closely aligned with such policies. This is post-secondary education or not, going to college vs. also interlinked with the findings on choice of university, choice of discipline, etc., are all discipline and parallel programs that are detailed in influenced substantially by financial constraints, it the report. It is vital to consider all these factors February 2012 · Number 56 · 3 when such programs are developed in order to Contact MNA K&L: adopt a holistic approach in tackling education and Laura Tuck, Director, Strategy and Operations. employment problems altogether. MENA Region, The World Bank Regional Quick Notes Team: Omer Karasapan, , Roby Fields, and Hafed Al-Ghwell Tel #: (202) 473 8177 The MNA Quick Notes are intended to summarize lessons learned from MNA and other Bank Knowledge and Learning activities. The Notes do not necessarily reflect the views of the World Bank, its board or its member countries. February 2012 · Number 56 · 4