Abstract

Allocation of Defaulted Loans to Finance University Tuition Fees

About 1.5 million students will have to pay university tuition fees in Germany in the near future, since eight of the federal Länder have thus fardecided to collect such fees. In accordance with a Federal Constitutional Court (Bundesverfassungsgericht) decision, the governments of the federal Länder are obligated, when charging university tuition fees, to create socially acceptable loan facilities for students. However, substantial losses must be expected to occur in the repayment of such loans which the universities will presumably have to take themselves. The question arises what axiomatic demands must be made to ensure a fair sharing of such losses among the universities and how pertinent models could be shaped. Possible methods for solving this problem would range from a "market-based approach" under which each university would have to take individually all the losses arising under its student-loan arrangements to a "socialism-based approach" under which losses would be evenly shared among all the universities participating in the system and which would, thus, be fully borne collectively. Finally, this article presents an axiomatically founded fair redistribution function based on what we have called a "guidance model" which permits a market-based system to be combined with a socialism-based one. This article is addressed to business administrators at the academic and the business levels as well as to policy-makers.