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'Financing Higher Education Worldwide'

June 24, 2010

Who pays for higher education? Whether talking about the government role or the student responsibility, the question is controversial all over the world, and many policies are in flux. Financing Higher Education Worldwide, a new book from the Johns Hopkins University Press, surveys the globe for the trends and their implications. The authors are D. Bruce Johnstone, SUNY Distinguished Service Professor of Higher and Comparative Education Emeritus at the State University of New York at Buffalo, and Pamela N. Marcucci, project manager of Buffalo's International Comparative Higher Education Finance and Accessibility Project. They responded via e-mail to questions about their book.

Q: Historically, how has financing higher education differed outside the United States from the American model?

A: The key financing differences (with very many variations and nuances that are impossible to cover in a fast answer) are the following:

  • The United States has a large tuition- and philanthropy-dependent private nonprofit sector, which contains both the most and the least prestigious and selective institutions and which provides two very substantial non-tax-based revenue streams -- tuition and philanthropy – that are unmatched in any other country. (Europe has virtually no significant private colleges or universities. Japan, Korea, the Philippines, and several other Asian nations, as well as most of the South American countries have fairly robust private sectors, although most are significantly less prestigious than their public sector counterparts. Private sectors are also flourishing in most of the transitional / post-Communist world as well as in Africa, but these institutions tend to be low-cost -- that is, not featuring science or engineering or other high-cost esoteric disciplines -- and are generally financially fragile as well as much less clearly not-for-profit.)
  • The U.S. features a significant reliance on tuition fees as well as more nearly break-even fees for food and lodging in the public as well as the private sectors, with tuition fees ranging at undergraduate levels in neighborhood of 20 to 40 percent of instructional costs. Japan, China, and Canada also feature significant public sector tuitions. European countries feature low, only nominal, or even no tuition fees. Most of the formerly communist world as well as many countries in Africa feature no or only nominal tuition fees for a limited number of the most academically well prepared students, but allow other students, who are deemed to be admissible but who have scored below the cut-off on the university entrance exam (set to yield only the number that the government is prepared to fund) to be admitted, but only at very high (essentially full-cost) tuition fees. At the same time, tuition fees are now appearing in some guise – albeit very politically contested -- in almost all countries with the exception of the Nordic countries and a few other countries in Europe.
  • Tuition fees in the United States (as well as in Canada, China, and Japan and many other countries, but explicitly not in England, Australia, or the other constituent countries of the United Kingdom) are assumed to be paid up-front by parents to the extent that the family is deemed to be financially able to contribute. In the Nordic countries that have no tuition fees, as well as Australia, England and the other constituent countries of the United Kingdom, all of which have tuition fees but defer them as loans for all students, the student is considered to be financially independent of his or her parents and thus responsible for any tuition fees in the form of additional loans.
  • Colleges and universities in the United States – public as well as private – obtain significant revenue from philanthropy (both past philanthropy in the form of returns on endowment, as well as current philanthropy in the form of annual donations). Other countries are attempting to emulate the US, but few are able to do so (for a variety of financial, governmental, and cultural reasons).
  • From the very extensive other-than-tax revenue to U.S. colleges and universities, public and private, the United States gets more higher education for the tax dollar spent than any other country.
  • Because of (i) our very accessible admission policies (that is, students being able to access colleges and universities who would be deemed academically unprepared in any other country), (ii) the ability of students to move from essentially open admission, "short-cycle," community colleges into bachelor degree colleges and universities, and (iii) the very extensive volume of (mainly) need-based financial assistance, the United States has a measure of accessibility unmatched by any other country. (This in spite of our high tuition fees in both the public and private sectors.)

Q: The use of tuition (or the growth of tuition) is generally proposed as a means for assuring quality -- does the increasingly reliance on tuition worldwide make sense?

A: Absolutely. The entire world is facing what we call in our book the seriously diverging trajectories of soaring higher education costs and revenue needs and the flat (at best) revenues available from governments and taxpayers. The very rapidly increasing costs / revenue needs are greatest in most of the developing world, which see a rapid increase in per-student costs for the same reasons as in the US, but that are also experiencing a serious multiplier of these revenue needs in the form of surging enrollments – which in turn are due to (a) demographics, with very rapidly increasing college-age populations, further accelerated by (b) an equally rapid increase in the proportion of these (already increasing) cohorts completing high school and wanting to go on to some form of higher education. In the meantime, most governments are far closer to a true effective limit on taxes than is the United States, and the low- and middle-income countries additionally face a very large, and both socially and politically compelling, queue of public needs that are competing with higher education for any possible additional tax dollars (such as elementary and secondary education, public health, and a long list of desperately needed investments in public infrastructure). In short, higher education throughout the world must have increasing amounts of nongovernmental revenue – and tuition fees are the easiest, most equitable, and least educationally disruptive source.

Q: Loan systems almost always follow tuition. What are the major trends in student loans internationally?

A: There are estimated to be nearly 100 loan plans throughout the world (although the number is difficult to specify, as some are very small and restricted). So the major trend is simply more countries turning to student loans to enable students to invest in their own higher education. At the same time, most of these loans do not yet provide truly supplemental revenue, as they tend to contain too many subsidies and oftentimes excessive defaults. (Student loans in the United States, contrary to common misconception, have comparatively minimal subsidies, and most loans feature remarkably low rates of default.)

Within the many forms of student loans, the form that seems to be the most popular – although it is not always the most financially feasible or the form that can provide a sufficient number and volume of lending – is the so-called income contingent loan, where the repayments are based on the student’s current income rather than being based on a fixed schedule of payments as in conventional loans. (It is important to note, however, that our own fixed schedule / loans now become effectively income contingent during periods of unemployment or at low levels of earnings. Also, most students will still repay the same effective amount as on a fixed schedule loan.)

Q: Are there countries that you think are particularly ambitious in the government role in promoting high quality higher education, with access?

A: I suppose that the Nordic countries (Norway, Sweden, Finland, Denmark, and Iceland) might be cited, although all but Norway, with its North Sea oil, are experiencing financial austerity at this time. But accessibility in such countries is also a far simpler challenge, without the extent of deep poverty and virtual family disintegration found in the United States. Otherwise, I would have to mention Japan, Korea, and China – albeit with considerable differences -- as certainly ambitious and increasingly successful.

Q: What impact will the Bologna Process have on trends in financing higher education?

A: The Bologna Process features a European-wide transition from the so-called long, and mainly examination-based, first degree that was essentially equivalent to an American master's degree, to a much shorter, three or four-year bachelor's degree that is based, as in the U.S., on a combination of potentially transferable courses and credits and that allows much more mobility between institutions. The important ramifications to institutional finance and to the elements of cost-sharing, such as tuition fees and student financial assistance, are two. First, European countries are prohibited from charging differential fees to students from other European countries (that is, no out-of-state tuition fees). Second, financial assistance, and particularly student loans, are much more complex in a European-wise context, where, for example, declarations of bankruptcy and the attachment of wages are more complicated across national borders. Also, the increased mobility of both students and scholars and the supposed increase in institutional competition that is at the heart of the Bologna process will undoubtedly privilege some institutions and disadvantage others, and the privileged institutions will be mainly the classical European universities in the more affluent European countries, and especially the English-speaking ones.

Q: As you look at worldwide trends on financing higher education, do they create opportunities for the U.S. or for American colleges?

A: U.S. higher education will continue for many years to be at the academic top for our academic scholarship and research. We will also continue to benefit from the worldwide thirst for English-language degrees, and from the increasing numbers of middle- and upper middle-income families in China, India, Brazil and other high economic growth countries that will be able (albeit with some difficulties­, which we will have to address) to afford the very high costs of a U.S. college degree for their children. At the same time, these countries, also are improving their own institutions of higher education, and the U.S. will also continue to experience intense competition from the other English-speaking exporters of higher education like Australia, Canada, New Zealand, the United Kingdom, and Ireland.

 

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