Sunday, 26 October 2014

GLOBAL: Public higher education versus private

Issue No:340

At the tertiary level, public expenditure per student in both public and private institutions averaged US$9,221 in OECD countries in 2012, the Education at a Glance report says. But the amount varied from about US$2,000 in Chile to more than US$17,000 in Denmark, Finland, Norway and Sweden – the four countries where the share of private spending is small or negligible.

In all countries with available data, except Hungary and Latvia, public expenditure per student is greater for public than private institutions. But patterns in the allocation of public funds to public and private institutions differ, the OECD analysts say.

In Denmark and the Netherlands, at least 90% of students are enrolled in public universities and most public money goes to these institutions. In the two countries, private funds complement public spending to varying degrees although private expenditure is less than 6% of total spending on public and private institutions in Denmark but above 28% in the Netherlands.

In Belgium, Estonia, Hungary, Iceland and Sweden, public expenditure goes to both public and private institutions. Government allocations per student in some private institutions is at least 58% and more than 100% of the level of public spending per student in public universities.

However, these countries also have different participation patterns. In Hungary, Iceland and Sweden, at least 80% of students are enrolled in public universities, whereas in Belgium and Estonia, they are mainly in government-dependent private institutions. In all three first-mentioned nations, the share of expenditure on private tertiary institutions is below the OECD average, while in the remaining two countries, taxpayers’ money goes mainly to private universities.

Public expenditure on tertiary education amounts to nearly one-quarter of total public education spending on average across OECD countries. But in the OECD and partner countries, the percentages range from less than 16% in Korea, to 32% in Finland, 36% in Canada and 38% in Turkey.

Grants and loans to students

OECD research indicates that a robust financial support system is important for ensuring good outcomes for higher education students, and that the type of aid is also critical, the report says. A key question in many OECD countries is whether financial support for students should be provided primarily in the form of grants or loans. Advocates of student loans argue that these allow available resources to be spread further.

If the amount spent on grants were used to guarantee or subsidise loans instead, aid would be available to more students, and overall access to higher education would increase. Loans also shift some of the cost of education on to those who benefit most from higher education, namely the individual student, and reflect the high private returns of completing tertiary education.

Opponents argue that student loans are less effective than grants in encouraging low-income students to pursue further education. They also argue that loans may be less efficient than anticipated because of the various types of support provided to borrowers or lenders and the costs of administration and servicing.

Finally, the report notes that a high level of student debt may have adverse effects both for students and for governments if large numbers of students are unable to repay their loans.

Allocations to higher education

OECD countries spend an average of about 22% of their public budgets for tertiary education on support for students “and private entities”. In Australia, Chile, Denmark, Iceland, Japan, the Netherlands, New Zealand, Norway, the UK and the US, government support for students accounts for more than 25% of public spending on tertiary education.

Only Argentina, the Czech Republic and Indonesia spend less than 7% of total public spending on the tertiary sector in supporting their students. In the Czech Republic, subsidies for students’ grants are sent directly to institutions which are responsible for distributing them among students.

A dozen of the 36 countries for which data are available rely exclusively on scholarships, grants and transfer payments to private institutions. Iceland provides only student loans while other countries make a combination of grants and loans available. Both types of support are used extensively in Australia, Chile, the Netherlands, New Zealand, Norway, Sweden, the UK and the US.

In general, the countries that offer student loans are also those in which public support for students comprises the largest proportion of all public spending on tertiary education. In most cases, these countries also spend an above-average proportion of their tertiary education budgets on grants and scholarships, the report says.

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