Outline of funding models in higher education across the world

Dr. Dominic OrrAffiliated researcher at DZHW Hannover (http://www.dzhw.eu/en)Affiliated researcher at FiBS Research Berlin (http://fibs.eu/en/)[email protected] and @DominicOrr

Outline of the various funding models in higher education across the world – with a focus on the role of student contributions

A Dialogue on the Future Funding of Higher Education in Ireland 23 September 2015

The Meccano Bridge built by Queen's University civil engineering students at

Clarendon Dock, Belfast. Pic: Stephen Davison/Pacemaker.

mailto:[email protected]

2Royal Irish Academy Dublin, 23/09/2015@DominicOrr#highered funding

Contents

1. Principles influencing higher ed funding2. Basic scheme for funding higher ed3. Funding model component: mechanisms4. Funding model component: ratio grant:fees:3rd party5. Funding model component: principle "public-first"6. Funding model component: affordability7. Funding model component: equity8. Some questions for Irish higher ed


Principles and assumptions behind funding models

• Size of the higher ed system – current and planned (demand from Economy, from potential students and their parents)

• Governance of HEIs – what role does the funding system play in the governance constellation?

• Size and stability of the public budget for higher ed (e.g. austerity vs. multi-year agreements)

• Tasks of “tertiary education” sector (research vs. teaching, academic vs. vocational)

• Means of achieving tasks (short- vs. long-cycle courses, part- vs. full-time provision, public HEI vs. private HEI)

• Social values on (re)allocation of educational costs (private vs. tax-payers)


Funding higher ed: between public and private costs

Scheme of Higher Education Funding

Research

Other study-related costs

Tuition/ participation fees

Living costs

dire

ct /

indi

rect

(gra

nts,

loan

s, ta

x be

nefit

s… Teaching / learning

Job

State

Business

Student

Parents / family

Private donations

Source: author

But is it sustainable?

• Is it sufficient to assure quality of services (teaching, research, transfer…)?

• Is it sufficient to attain the goal of social mobility (equitable access, affordability)?


State grant Third-party funding

Tuition fees

Discretionary fundingControlled competitionMarket competition

incremental & strategicperformance-based

research grants

business contracts

blanket fees

individual fees

Funding model component: mechanisms

Source: author


Funding model component: ratio between state grant, fees and third-party funding

Source: own calculations, ETER data set

average


Funding model component: ratio between state grant, fees and third-party funding

High contribution of tuition fees to total income and low contribution of third party funding to total incomeCY, MT

High contribution of tuition fees to total income and high contribution of third party funding to total incomeIE, LT

Low contribution of tuition fees to total income and low contribution of third party funding to total incomeFR, LU

Low contribution of tuition fees to total income and high contribution of third party funding to total incomeNO, CH, DK, NL, (DE, SE)


Higher ed funding trend in Irish higher ed

Source: own calculations, Grant Thornton 2014


Interlude: Funding model component: private higher education sector

Source: own calculations, OECD data set


Funding model component: principle “public-first” in European higher ed

Question: can expanding systems keep up this principle?

• “Yes”: Germany & Austria (after short blips)• “No”: Portugal (two departures)• “Yes for some, but not for others”: former Communist higher ed

systems like Poland and Hungary give free places on merit (but Poland using demographic decrease as chance)

• “No”: England (continuous increase based on politics – but loans)

• Interesting: South Korea using demographic decrease to increase study aid (loans)


….exception England – swap between public and private funding (if you ignore publically funded loans)

England: Per-student income of HEIs, by source (1995-2011)

Note: Constant prices (2011).Source: Case study research.


European higher education display a preference for study aid and a link between tuition fees and study aid

Source: own calculations, based on data in EACEA 2015


European higher education display a preference for study aid and a link between tuition fees and study aid

Source: own calculations, based on data in EACEA 2015

Trend in student aid budget – increase and Trend in household expenditure on HE - declinePL, RO, EE, HR, LV, PT

Trend in student aid budget – increase and Trend in household expenditure on HE - increaseUK, BG, IT, SK (FR, ES, IS, NL)

Trend in student aid budget – decline and Trend in household expenditure on HE - declineAT, LT, CZ, SI (BE, CY)

Trend in student aid budget – decline and Trend in household expenditure on HE - increaseIE, DK


South Korea: Tuition fees, net fees & ‘out-of-pocket’ fees in public HEIS (1991-2011)

Note: Net student fees is student fees minus grants. Constant prices (2011).Source: Country Index; Ministry of Education.

Out-of-pocket fees

….Korea is using demographic decline to support more studentsw

on

Out-of-pocket fees


Is Germany the archetypal non-fee European model? Perhaps!

Source: Wößmann, L., Lergetporer, P., Kugler, F., Oestreich, L., & Werner, K. (2015)

Germany had fees from 2007 on a low level (average €500 per semester)

Income was ring-fenced for improving teaching

Over time the exceptions to fee paying were increased

In academic year 2014/2015 no students in public higher ed pay tuition fees

Is this because fees are not acceptable in Germany? No.

61% would support fees, if there was post-graduation payment


Funding model component: affordability (UN Sustainable Development Goal 4.3) / sticker and net price in the USA

Source: http://trends.collegeboard.org/college-pricing/figures-tables/net-price-public-four-year-institutions-residency-dependency-income-2011-12

Problem of “overheating”

Loss of value of study aid Austerity following 2008

led to large public budget cuts

Many students pay lower fees than advertised

Fees monitored, as the state can’t control them

Case: Washington DC fee cuts announced September 2015

Case: online learning


Funding model component: equity (UN Sustainable Development Goal 4.3) / fees just one element

Fees in NL and IE


-

10

20

30

40

50

60

70

80

NL EE SE DK AT DE ME IE FI CZ HR BA PL HU SI SK RS LV RO

SHARE OF (ALL) STUDENTS WITH FINANCIAL WORRIES (NOT LIVING WITH PARENTS)

Not at all / slightly worried Seriously / very seriously worried

Source: own calculations, EUROSTUDENT V data set, subtopic F7

Important to watch: students’ own assessment of having financial difficulties


• Can Ireland hold on to the 3 imperatives for higher education? Equity, affordability and quality

• Does Ireland need to re-think the meaning of providing HE? (short- vs. long-cycle, part- vs. full-time, distance vs. presence…, vocational vs. academic focus)

Questions for Ireland regarding funding higher ed


Size & shape of HE

Source: excerpt from Trow 2007


Appendices: Further reading

Hauschildt, K., Gwosć, C., Netz, N., & Mishra, S. (2015). Social and economic conditions of student life in Europe (EUROSTUDENT V 2012-2015). W. Bertelsmann. http://doi.org/10.3278/6001920bw

Grant Thornton. (2014). A changing landscape. Review of the financial health of the Irish higher education sector. Retrieved from http://www.grantthornton.ie/db/Attachments/Higher-education-Financial-Analysis-Report-080414-F.pdf

Johnstone, D. B. (2014). Financing Higher Education: Worldwide Perspectives and Lessons. The International Comparative Higher Education Finance and Accessibility Project. Retrieved from http://gse.buffalo.edu/org/inthigheredfinance/files/Recent_Publications/Financing H Ed WW Perspectives and policy options revised.pdf

Orr, D., Wespel, J., & Usher, A. (2014). Do changes in cost-sharing have an impact on the behaviour of students and higher education institutions ? Evidence from nine case studies VOLUME I: Comparative Report. Publications Office of the European Union. http://doi.org/10.2766/73985

Trow, M. (2007). Reflections on the Transition from Elite to Mass to Universal Access: Forms and Phases of Higher Education in Modern Societies since WWII. In J. F. Forest & P. Altbach (Eds.), International Handbook of Higher Education SE - 13 (Vol. 18, pp. 243–280). Springer Netherlands. http://doi.org/10.1007/978-1-4020-4012-2_13

Wößmann, L., Lergetporer, P., Kugler, F., Oestreich, L., & Werner, K. (2015). Deutsche sind zu grundlegenden Bildungsreformen bereit – Ergebnisse des ifo Bildungsbarometers 2015. Ifo Schnelldienst, 68(17). Retrieved from http://www.cesifo-group.de/DocDL/sd-2015-17-woessmann-etal-bildungsbarometer.pdf