student housing, food, insurances and study material during forty weeks of a year, but in practice the cost of living for an average student has from time to time exceeded the support provided by the government. The cash benefit is about one third of the total, while two thirds is a loan. $ ^{6} $ Before 2001 a student did not have to start repaying the loan until he/she had a job and labor incomes. Then 4 per cent of the tax assessed income was deducted as interest and payment towards the principal. If the loan was not fully repaid at the age of 65, it was remitted. $ ^{7} $

An issue of policy interest was thus to predict the share of students that would never fully repay their loans and the total cost to the government of this remittance. The first version of SESIM was used for this purpose. The study, Ericson and Hussénius (2000), utilized the potential of SESIM to simulate the whole life-cycle and compute life-cycle incomes net of taxes and the charges for the study loans. In cross-sectional studies grants to students who have no or only low incomes are typically shown to equalize the distribution of income, but in a lifecycle perspective this result is not that obvious. A second objective of the study was thus to evaluate how the life-cycle return to education depended on the length of studies and on gender.

#### 3.1.2 Simulation results

Assuming that the conditions at the end of the 1990s prevail in the future, the model was simulated until it reached a steady state in which the number of births equaled the number of deaths and the population shares in each status were constant. Then people were followed until they died. In this way the results were not influenced by population changes and fluctuations in the supply of higher education. The simulations were also done using the assumption of no growth. The reason was that in a growing economy tax scales and benefits will have to be adjusted, and in the absence of rules for automatic adjustments one would have to predict what politicians would do in a distant future. To avoid this problem no growth was assumed.

Total income was defined in the following way: The sum of labor incomes, pensions, incomes of capital, study loans and cash benefits to students, less the sum of income tax, tax on capital incomes, repayments towards the principal of study loans, and interest on these loans. Labor income included earnings, sickness benefits, parental benefits and unemployment compensation. Pensions included old-age pensions and disability pensions, but not occupational pensions. $ ^{8} $

Life-cycle income is the sum of all total incomes from the age of 16 until the person dies. They were only computed for those who were simulated to reach the age of 60. Table 3.1 gives life-cycle incomes by length of schooling and by gender using the assumption that the interest rate on study loans was 1.3 per cent. We find that males have higher life-cycle incomes than females and that more schooling increases life-cycle income. The excess rate of return to university training relative to no university is higher for females than for males. The explanation is that the difference in length of working life between those with a university